GOLD Issue 09 by Kevi Chishios

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SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LETISSUE JOURNEY SHOP 2011 DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN 09 DECEMBER EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE PRICE €6.95 SLIDE ENJOY powered by: STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SHOP DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SHOP the international & finance of cyprus DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALKinvestment, BUILD DANCEbusiness VISIT ATTEND LISTENmagazine EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SHOP DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SHOP DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SHOP DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SHOP DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SHOP DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SHOP DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SHOP DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SHOP DRINK BID RELAX BE SEE VIEW BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER PURCHASE SAIL BUY GO REVEL HIRE WEAR CELEBRATE SAMPLE FLY CATCH SKI ENTER DRESS UP DRESS DOWN GET INVEST TRAVEL HAVE DARE WATCH SIT IN PARTY BUY DRESS TAKE LET JOURNEY SPECIAL FEATURE: CYPRUS INTERNATIONAL TRUSTS SHOP DRINK BID RELAX BE SEE VIEW+ BATHE BALLOON WALK BUILD DANCE VISIT ATTEND LISTEN EXPLORE SAVOUR GO GLAMP RECORD GIVE SOAR RELISH ORDER SPEND CAGE DIVE LIVE COOL OFF TAKE BOOK DINE SLIDE ENJOY STAY Plus:GO REVEL HIRE WEAR REALDRIVE ESTATE ECONOMY CHARTER GAMBLE RENT OWN INDULGE EXPERIENCEINTERVIEWS EAT PAMPER PURCHASE SAIL BUY MONEY / BUSINESS Emerging Trends Peter Ayliffe CELEBRATE SAMPLE FLY CATCH Learning SKI ENTERfrom DRESS UP DRESS DOWN GET INVEST TRAVEL ECONOMY HAVE DARE WATCH SIT IN theDRESS Property GalinaBEGut past financial PARTYinBUY TAKE LET JOURNEY SHOP DRINK BID RELAX SEE VIEW BATHE BALLOON WALK BUILD DANCE TAX & LEGAL LIFESTYLE opinion VISIT Market ATTEND LISTEN EXPLORE SAVOUR GIVE SOAR RELISH ORDER SPEND CAGE/DIVE LIVE COOL Kamyshnikov crises GO GLAMP RECORDGennady OFF TAKE BOOK DINE SLIDE ENJOY STAY CHARTER DRIVE GAMBLE RENT OWN INDULGE EXPERIENCE EAT PAMPER

THE GOOD LIFE

100 Once-In-A-Lifetime Experiences

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08 EDITORIAL 10 DEALS OF THE MONTH 12 NEWS BRIEFING 16 FIVE MINUTES WITH 18 INDICATORS | COMMODITIES | FOREX

issue 09 december 2011

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COVER STORY

the good life

100 once-in-a-lifetime experiences

Solving the problem by Demosthenes Mavrellis

the debate by Stephan Vikledartin (Yes) and Petros Petrou (No)

passports - moving with the times by Trevor Peacock 38 let's do an apple on greece by Peter Economides

26 84 94 FEATURES 40 | SPECIAL FEATURE Cyprus Trusts at a Glance

58 | Divorce Premeditated International Divorce Planning

60 | Divorce Utilising trusts as a firewall against costly divorce claims

64 | Property Emerging Trends in the Real Estate Market

66 | Property Getting the Property Market Back On Track

68 | When History Repeats Itself Have we learnt anything from past financial crises?

72 | The Future of Payment Itâ&#x20AC;&#x2122;s time to wave goodbye to our wallets 6

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EDITORIAL

Thank You

ecember is traditionally the time when not only the media but all of us like to look back over the previous twelve months and assess what kind of a year it has been. In December 2010, a decision was taken by IMH, the island’s leading business information, knowledge and skills transfer company, to publish a new magazine dealing with global and Cypriot investment, business and financial issues. With Cyprus and much of the world still in recession and many commentators predicting an even more severe 2011, the idea of starting any new project, let alone an English-language magazine, during a time of economic crisis may not have appeared to be a particularly clever idea. Nonetheless, in April the launch edition of Gold was published and you are now holding the ninth issue. A key reason behind IMH’s decision to create a new publication was its belief that the local services sector was possibly the only one likely to enjoy growth in 2011. And despite increasingly difficult times for Cyprus and its economy, made even more difficult by the Greek bailout and the effect of the 50% ‘haircut’ of Greek debt on this country’s three main banks, the sector has indeed maintained a healthy momentum and Cyprus has consolidated its reputation as a wellorganised international business centre, rating agency downgrades notwithstanding. Over the past nine months, Gold has provided a platform for many companies, organisations and individuals to promote their activities, share their expertise and air their views on topics affecting the services sector relating to business, investment, taxation, legal and economic issues. Our dedicated team has responded to comments, suggestions and proposals from professionals across the island we have published articles and features that touch on matters of substance and interest to all our readers: foreign investors in Cyprus, High Net Worth and affluent individuals, employees of international corporations based in Cyprus and those offering services: legal, accounting, audit and tax professionals, those in the fiduciary and financial services sector, private bankers, wealth managers, investment bankers and advisors, brokers and fund managers. We are also read by people who are none of the above but maintain a lively interest in business and finance. One of the main objectives of Gold has been to contribute towards the promotion of Cyprus as an international business and investment centre and, by extension, of the professionals offering related services. This is why, for example, we have sponsored a number of international conferences and been designated media sponsor for all the foreign trade missions of the Cyprus Chamber of Commerce & Industry (CCCI). Copies of Gold are distributed during the CCCI’s business forums in all the countries where these are held. The magazine also go to selected government officials, research centres, Chambers of Commerce and business associations in Cyprus and abroad. Nine issues of Gold and nine editorials since we started, I am delighted to say that the response from readers and advertisers has not only been beyond our expectations but it continues to grow. You have told us what you would like to see in your magazine and we have endeavoured to provide it. By this time next year, I am confident that the ties between us and you, our thousands of readers, will have grown even stronger. Moreover, I hope that when we come to look back over 2012, the picture will be more optimistic and promising than what we see as we cast a critical eye over 2011 which, in Cyprus at least, has been overshadowed by repeated downgrades of the economy and the banks’ credit ratings, the destruction of the island’s largest power station and the government’s inability to implement essential but unpopular austerity measures. Finally, I am sure that I am not alone in wishing that by the time you read these words, Cyprus’ political parties will have united behind the Minister of Finance and supported efforts to ensure that 2012 will be a better year for everyone. Thank you for your support of Gold. My team and I are committed to bringing you another twelve excellent issues next year. Merry Christmas!

John Vickers, Chief Editor john@imh.com.cy 8

the international investment, business & finance magazine of cyprus

Published by IMH ISSN 1986 - 3543

Managing Director:

George Michail

General Manager:

Daphne Roditou Tang

Media Manager: Elena Leontiou Editor-In-Chief:

John Vickers

Senior Editor:

Konstantine Ioannides Contributing Editors:

Antonis Antoniou, Stella Mourettou, Maria Pilidou Contributors to this issue:

Andreas Constantinides, Peter Economides, Peter G. Economides, IsavellaFrangou-Pavlou, Maria Kyriacou, Nathalie Kyrou, Anastasios P. Leventis, Demosthenes Mavrellis, Theodore Panayotou, Trevor Peacock, Petros Petrou, George Theocharides, Phivos Theocharides, Stephan Vikledartin Art Director:

Andreas Koumis

Photography:

Olesia Constantinou, Michael Kyprianou Marketing Executive:

Kevi Chishios

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Christos Kyriakides

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Irene Georgiou, Christopher Constantinou Operations Manager:

Voulla Nicolaou

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It’s not about doing different things...

news briefing

deals of the month Boeing wins biggest-ever order in Lion Air deal Boeing has signed its biggest-ever commercial order for 230 short-haul 737 planes worth $21.7bn (€16bn) with the Indonesian airline Lion Air. The deal with Indonesia’s largest private carrier includes an option for another 150 aircraft worth an estimated $14bn. The US planemaker said that the Lion Air order, when finalised, would be its largest ever in terms of price and the number of planes. It came only days after Boeing announced a deal to sell 50 of its 777 jets to Emirates Airlines for a list price of $18bn.

EMI sells music unit to Universal for £1.2bn UK music firm EMI is to sell its recorded music unit for £1.2bn ($1.9bn) to Universal Music. The other half of EMI’s business – the lucrative music publishing unit – will most likely go to a Sony-led consortium for more than $2bn. EMI, with a history dating back to 1897, is home to artists including Coldplay, the Beatles and Pink Floyd. Among its labels are Blue Note, Capitol, Parlophone and Virgin Records while those under the Universal umbrella include Def Jam, Motown, Decca, Island Records, Interscope Records and Polydor. Private equity firm Terra Firma, led by Guy Hands, bought EMI for £4.2bn in 2007 just before the credit crunch sent the global financial markets into turmoil. It subsequently admitted that it had overpaid for EMI and struggled to meet payments on the £2.6bn it had borrowed from Citigroup to fund the deal. Last year, Terra Firma took Citigroup to court in the US, accusing the bank of tricking it into paying an inflated price for EMI. It lost the case, with a jury ruling in favour of Citigroup which seized ownership of the company.

Northern Rock sold to Virgin Money Northern Rock, the UK bank which was nationalised in 2008 following its near-collapse during the global financial crisis, was sold last month to Virgin Money for £747m. Chancellor George Osborne said that the sale offered the “best possible deal” for taxpayers, despite the fact that as taxpayers had injected £1.4bn into Northern Rock in 2010, the sale would see a loss of somewhere between £400m and £650m. In a deal negotiated by his predecessor Alistair Darling with the European Commission over state aid to banks, the government was obliged to sell the majority of its stake but not until the end of 2013.

£4.2B

best possible deal

The Beatles were photographed in the stairwell at EMI House, Manchester Square, for their debut album cover. 10

the international investment, business & finance magazine of cyprus

Northern Rock plc will be rebranded as Virgin Money, which has pledged no compulsory job cuts for three years. The bank currently employs 2,500 people, down from 5,500 when it was nationalized and the government split the bank into two, Northern Rock plc, and Northern Rock (Asset Management) into which its bad debt was placed.

$21.7B The sale of Northern Rock plc is expected to be completed on 1 January 2012. Virgin Money is part of Sir Richard Branson’s Virgin Group.

Starbucks buys Evolution Fresh The coffee chain Starbucks is looking to a new source for growth: juice bars. It has just acquired the small, upscale juice maker Evolution Fresh Inc. for $30 million in a deal that shows how serious the company is about transforming itself into a broader consumer products player with a large presence outside its own stores. Evolution Fresh juice is already sold on the West Coast of America in stores such as Safeway, Costco and Whole Foods, and Starbucks plans to extend the brand to more retailers, including its own cafes. The company also plans to open juice bars next year that will sell the Evolution Fresh brand as well as health foods. Starbucks says its nascent consumer products business will one day rival its coffee shops in sales. In January the company unveiled a new logo that dropped the words “Starbucks coffee” and made its siren figure larger, signalling that it’s not all about the coffee anymore.

Prudens Limited and its team of trained and specialised professionals are ready to provide you with customised corporate, fiduciary and accounting services. Our team can offer you advice on tax issues and restructuring your corporate structures or even personal wealth. Solutions are offered in various jurisdictions selecting the one that will most suit your needs. • Company Formation and Management • Trusts & Trustee Services / Foundations • Accounting Services • Tax Advisory and Group Structuring Service • Banking Support Services

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news briefing

Marks & Spencer returns to Paris

Liz Taylor jewellery sale ‘will boost collecting’ All eyes will be on New York on December 13-14 as the hammer comes down at Christie’s on 400 lots of couture, art, jewels and watches belonging to Elizabeth Taylor’s estate in what is being described as the “sale of the century”. Widely celebrated as one of the greatest private collections ever assembled, this dazzling array of jewels includes Elizabeth Taylor’s most iconic diamonds, gemstones and one-of-a-kind creations. The total selection of 269 jewels is expected to achieve well in excess of $30 million. The sale is also creating new interest in precious vintage jewellery and it is expected to provide a considerable boost to the jewellery market, according to Rahul Kadakia, head of jewellery for Christie’s Americas. Selections from the

many people as possible to see her jewels, which is why she wore them every day. “She believed jewels should be worn, not put in a museum, and that people have custodianship of precious stones, not ownership. If the people who view them start to think in that way, that would be fine with her.” For Pierre Rainero, creative director at Cartier, Taylor’s real legacy will be to throw a new spotlight on collecting. “She was a true collector in a way not much seen since early in the 20th century,” he says. “She valued stones for their beauty and history. Serious collecting like this faded away late last century, but there are signs of its revival, especially in the new markets, and I believe this sale will give the idea fresh impetus.”

Marks & Spencer has opened its first French store in Paris, ten years after it exited the country amid a wave of protests. The company’s Chief Executive, Marc Bolland, who officially opened the store on the Champs-Elysees on 24 November, said that M&S was “very excited” about its return: “Over the past 10 years the number of demands from people for us to come back has been enormous.” He added: “Our company has changed and France has moved on as well. We want to come back in an extremely positive way.” When Marks & Spencer closed all 18 of its French stores in 2001 with the loss of 1,650 jobs, there were street protests in Paris backed by government ministers. All M&S stores in continental Europe were closed as the company battled to turn around its British business. Last year the former boss Sir Stuart Rose said the decision to pull out of Europe had been a “tragic mistake”. The firm has signed leases for another three Paris stores and Bolland has said that he wants to speed up the group’s international expansion, particularly in Asian markets. M&S has 358 stores in 42 overseas territories.

Elizabeth Taylor believed jewels should be worn, not put in a museum

collection have been on a global tour of Christie’s branches and there have been enormous queues everywhere, not to mention considerable sums raised for the late actress’s AIDS charity from catalogue and ticket sales. Taylor’s pulling power as a Hollywood icon has meant that many people have come out of curiosity rather than with any intention of buying but, Kadakia says, the actress always wanted as 12

the international investment, business & finance magazine of cyprus

Rainero adds: “Elizabeth Taylor defined herself by her taste in jewellery, which is the most intimate accessory. I think the moving personal, emotional aspects of the sale will have a wider effect on client thinking.” So, even if the celebrity factor and the sheer quality of many of the items leads to memorable sale prices the effect on collectors and their future buying habits could be far more long lasting.

Marks & Spencer CEO Marc Bolland at the launch of the newly-opened Paris store

Global gold demand up 6% in third quarter of 2011 Gold demand in the third quarter of 2011 reached 1,053.9 tonnes, an increase of 6% compared to the same period last year. This equates to US$57.7bn, an all-time high in value terms. According to the World Gold Council’s latest Gold Demand Trends report, this increase was driven by investment demand which rose by 33% year-on-year to 468.1 tonnes, generating a record quarterly demand of US$25.6bn.

Gold Demand Statistics for Q3 2011 • The quarterly average price rose 39% from year earlier levels to US$1,702.12, while the gold price reached a new record of US$1,895.00 on 5-6 September. • Demand for gold bars and coins increased 29% to reach 390.5 tonnes, up from 303.0 tonnes in Q3 2010. In value terms demand for bars and coins in Q3 2011 equated to US$21.4bn compared to US$12.0bn in Q3 2010. • Gold ETFs and similar products witnessed inflows of 77.6 tonnes in the third quarter of 2011, which was 58% above year-earlier levels of 49.1 tonnes. • Global demand for gold jewellery of 465.6 tonnes in the third quarter of 2011 was 10% below year-earlier levels of 518.9 tonnes. In value terms demand reached a quarterly record of US$25.5bn, 24% higher than the third quarter of 2010, which registered US$20.5bn. • In spite of challenging market conditions, gold demand from the global technology sector showed significant resilience and was flat year-on-year at 120.2 tonnes. In value terms demand from the electronics sector was equivalent to a record US$4.8bn. • Central bank net purchases amounted to 148.4 tonnes, as they continued to increase their allocation to gold as a percentage of total reserves.

coins expand by 24% from year earlier levels to 60.2 tonnes. • Jewellery demand in India was sluggish during the seasonally slow months of July and August, compounded by high inflation and greater volatility in the local gold price. Buying has since recovered slightly with the onset of the festive and wedding season. Overall, Indian jewellery demand in Q3 saw a 26% decline in tonnage, when compared to the same quarter in 2010, to

investors will continue to seek protection

from economic uncertainty The report also details a number of other developments: • Investment demand in Europe reached a record quarterly value of €4.6bn, equating to 118.1 tonnes – a year-onyear increase of 135%. The increase in overall investment demand was all the more impressive given the sharp gold price correction in September, which encouraged a wave of profit-taking among bar and coin investors. Virtually all markets saw strong double-digit growth in demand for gold bars and coins. • Chinese jewellery demand was 13% higher year-on-year at 131.0 tonnes. The bulk of this increase was seen in smaller cities as retail chains expanded their networks to meet increasing demand fuelled by rising income levels. China’s growing appetite for gold as a means of investment saw demand for gold bars and

125.3 tonnes. However, yearly demand to the end of September is very close to the record levels seen in 2010. Commenting on the latest data, Marcus Grubb, Managing Director, Investment at the World Gold Council said, “Unsurprisingly investment demand for gold was a key driver during the third quarter. Increasing levels of inflation, the US credit rating downgrade, a worsening eurozone sovereign debt crisis and the lacklustre performance of many assets drove investors to increase holdings in gold in order to protect their wealth. Given gold’s proven risk mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty, which shows no signs of abating. The long-term fundamentals for gold remain strong with a diverse and growing demand base coupled with constrained supply-side activity.”

Gold supply was 1,034.4 tonnes in the third quarter of 2011, 2% higher than year-earlier levels of 1,013.0 tonnes. Mine production increased by 5% to 746.2 tonnes from 710.9 tonnes during the third quarter of 2010.

• Despite record prices being reached during the quarter, recycling activity was relatively modest. Third quarter 2011 gold recycling accounted for 426.5 tonnes of supply, up 13% year-on-year from 379.1 tonnes.

Investment demand by segment

Demand by sector (in tonnes)

Investment

468.1

(in tonnes)

Jewellery

465.6

Official sector

Technology

148.4

120.2

20.0

76.2

Medals and Official coins imitation coins

294.2 Bars

77.6 ETFs

the international investment, business & finance magazine of cyprus

news briefing

World’s Worst Countries for Business As Europe and the US face slowing growth, businesses are increasingly looking to expand into emerging markets in order to boost turnover and profit. Foreign direct investment (FDI) into countries such as Brazil, Russia and Indonesia has reached record levels, with Brazil attracting $48.4 billion in 2010, an increase of 87% over 2009. However, while it may be difficult to resist the growth opportunities provided by emerging markets, running a successful business in many of

these countries is far from easy. CNBC recently published its list of the 10 most difficult countries to do business in from 50 of the world’s largest economies. Its Top 10 rankings are based on the World Bank’s “Ease of Doing Business” study of 183 countries (Cyprus is ranked 40th). The rankings take into account 10 leading indicators, such as the ease of starting a business, getting construction permits, paying taxes, and investor protection laws, to name a few.

In fact, the Top 10 worst countries for business in the world are:

1. Chad 2. Central African Republic 3. Republic of Congo 4. Eritrea 5. Guinea 6. Democratic Republic of Congo 7. Venezuela 8. Guinea-Bissau 9. Benin 10. Haiti

the worst places in 50 of the world’s largest economies

1. Venezuela

3. Algeria

5. Nigeria

2010 GDP:

2010 GDP: 2010 FDI:

Venezuela is among the worst when it comes to ease of paying taxes, getting credit, investor protection laws, and cross-border trading, to name a few. Despite having some of the world’s largest oil and natural gas reserves, most Venezuelans live in poverty. Socialist President Hugo Chavez has nationalised much of the economy and imposed strict currency controls.

One of five oil-rich nations to make the list, Algeria ranks among the lowest in the world when it comes to starting a business, getting electricity, registering property, and filing taxes. Political unrest across the Arab world has prompted public sector wage increases, food subsidies, and unemployment benefits. The IMF forecasts 3% growth in 2012.

Although an oil-rich country, the majority of its population live on less than $2 a day and are exposed to dangerous levels of pollution. Political unrest and growing ethnic and religious tensions make Nigeria one of the worst places to do business in. It ranks among the lowest in the world when it comes to getting electricity and registering property for business.

2. Ukraine

4. Philippines

6. India

2010 GDP: 2010 FDI:

$387.8B 2010 FDI: -$1.4B

$137.9B $6.5B

Europe’s second largest country ranks among the very bottom when it comes to ease of paying taxes, dealing with construction permits, and access to electricity, among others. Companies pay more than 57% of their profit in taxes. In October, former Prime Minister Yulia Tymoshenko jailed for seven years on charges of abuse of power involving a gas deal with Russia. 14

the international investment, business & finance magazine of cyprus

$159.4B $2.3B

$199.6B $1.7B

Despite massive untapped mineral wealth and a key geographical location, the Philippines has fallen behind its neighbours in economic growth and attracted just 2.5% of the $76.5 billion in FDI that flowed to the 10 members of the Association of South East Asian Nations (ASEAN) in 2010. It ranks among the lowest when it comes to starting a business, and resolving insolvency

$194B $6.1B

$1.73T $24.6B

India may be the world’s fourth largest economy but is the second worst country in the world when it comes to enforcing a business contract and among the bottom three globally for dealing with construction permits. Despite this and endemic political corruption, India is predicted to be among the top five destinations for international investors by 2012.

UK economy set to contract as business confidence Michael Izza collapses

Deloitte launches iPhone & iPad app Deloitte has launched, a unique application that offers iPhone and iPad users the opportunity to learn more about the firm’s presence in Cyprus and around the globe and to keep them constantly updated on tax and other financial news in Cyprus, the European Union and beyond. In addition to company information and the latest tax and business news, the application features a Personal Tax Calculator and Office Locator providing details of all Deloitte offices in Cyprus and a visual of their precise location on the map.

Business confidence has collapsed according to the latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM). The Confidence Index has suffered its largest quarterly decline since the survey began, indicating that the UK economy will contract by as much as 0.2% in the last quarter of 2011.

Key findings for Q4 2011

7. Indonesia

9. Russia

2010 GDP: 2010 FDI:

Four of Indonesia’s five busiest international airports are operating above capacity and about 15 million households have no access to electricity. Its chronic infrastructure problems have long hampered its growth and $150 billion is needed to resolve them over the next five years. The government hopes that at least two-thirds will come from private investors.

Russia is the toughest place in the world for a business to get an electricity connection (over nine months) and the lack of investment in the power sector is stoking fears of more accidents and power cuts. Russia also ranks near the bottom for cross-border trade which, however, should become easier this month when it is expected to finally join the World Trade Organization (WTO).

8. Brazil

10. Argentina

2010 GDP: 2010 FDI:

$706.6B $13.3B

$2.1T $48.4B

The world’s eighth largest economy enjoyed 7.5% GDP growth in 2010 but Brazil has one of the highest tax burdens of any major economy, at around 37% of GDP. Companies are charged a total tax rate of more than 67%. Construction work on stadiums and airport terminals for the 2016 Olympic Games has been delayed amid accusations of government corruption.

$1.5T $41.2B

$388B $6.3B

It takes about one year to obtain a construction permit in Argentina and starting a business takes 26 days. Argentina’s 2002 debt default sent foreign investors fleeing South America’s second-biggest economy. Last month, the government ordered oil and gas companies to repatriate all future export revenue, which may make it harder for Argentina to attract FDI which fell by 30% in the first half of 2011.

• The BCM Confidence Index (CI) has fallen from +8.1 in Q3 2011 to -9.7 and is at its lowest level since the depths of recession in 2009 • Turnover and profit growth expectations have now declined for two successive quarters, implying sluggish growth will continue • A steep drop in capital investment growth expectations – a worrying sign of continued business nervousness – and over three-fifths of UK companies are operating below capacity Michael Izza, Chief Executive of ICAEW, said: “In the first nine months of the year, businesses have played their part in supporting economic growth. Many are proud of their success against a backdrop of a very slow and protracted recovery. Yet they are becoming increasingly worried about the immediate outlook and the risk of a double dip recession. They are looking to Government which now needs to take urgent steps to restore business confidence and to show that it understands the need to rapidly change the mood music that the business community clearly feels.” Grant Thornton CEO, Scott Barnes said: “The extent of negative sentiment in underlying business performance indicators, with confidence dropping across the UK’s regions and sectors, is worrying. Individual dynamic mid-market companies operating in niche markets continue to do well but the slump in consumer demand and the ongoing crisis in the eurozone is taking a toll. The question is less one of competitiveness and more about the resilience of domestic and international markets." the international investment, business & finance magazine of cyprus

interview

five minutes with... Christodoulos E. Angastiniotis, New chairman of the board of the Cyprus Investment Promotion Agency (cipa)

Gold: As the new Chairman of CIPA, what are your main priorities for the organisation? Christodoulos E. Angastiniotis: The first thing I intend to do is to set up a number of committees within CIPA in order to make the organisation more productive. Apart from an executive committee, they will include committees responsible for Promotion, Investor Support, Human Resources and Corporate Governance. They will be set up during our very first meeting. How do you expect the role of CIPA to evolve during your term as Chairman? Although its role has been clearly defined to a certain extent, I expect CIPA to be the representative of the state par excellence when it comes to attracting and managing foreign investments in Cyprus. I am pleased to say that a great deal of excellent work has been done by the previous Board and we are already very well organised. Trevor Peacock WhichBy countries will you be looking at to attract FDI into Cyprus? Our primary target is China, where we have an office which is doing excellent work. In addition to China, we are paying particular attention to Russia and Ukraine at this stage. We have also made preliminary contacts with Kazakhstan and, of course, the United States and the other EU member countries interest us too but we intend to take things one step at a time. Are you confident that the Cyprus government will manage the current crisis in a way that will protect foreign inward investment? 16

the international investment, business & finance magazine of cyprus

I am optimistic by nature but I am acutely aware of the need to act immediately and with clearly-targeted measures. Compared to what has happened in Greece, the measures that Cyprus needs to take by 15 December are much less painful but we must persuade Europe that we mean business and that we are willing to correct the negative aspects of the economy. The measures are certain to require strict fiscal discipline and everything this entails, but they must also encourage growth, the strengthening and development of entrepreneurship, the removal of bureaucracy and investment in research and innovation.

Won’t tax rises be inevitable? Unfortunately yes. It will not be enough to cut public sector salaries. We need measures that will increase tax revenues. However I totally disagree with the idea that companies should be taxed on their turnover – this is ridiculous. It is

essential not to kill off entrepreneurship, especially where small to medium sized enterprises are concerned because they are the ones that will bring growth and halt unemployment. It is unavoidable that those with accumulated wealth and considerable immovable assets will be taxed, as will the profits of local Cypriotowned companies. But other, smaller measures can be taken at once and at no cost to the state, including amendments to legislation regarding accelerated depreciation and redistribution of profits, as part of a broader package. What are the greatest threats to the Cyprus economy that CIPA will seek to alleviate? The downgrades by the international rating agencies and the consequent reduction in confidence in the country’s economy, which is collapsing in terms of ratings. The government, the state and the island’s political parties need to draw up a programme that is acceptable to all so that we can persuade the markets that we are serious about putting things right in the economy. If we fail to do this, the greatest threat to the country and to CIPA will be the lack of confidence in Cyprus on the part of foreign investors. What can CIPA do in order to attract more FDI to Cyprus? We can work towards greater promotion of the island’s advantages as well as towards correcting certain aspects of the regulatory framework, ensuring a lack of bureaucracy, simplifying processes and creating an investor- and investment-friendly environment.

Hereâ&#x20AC;&#x2122;s to more successes..

Happy new year !

Trust and corporate services Wealth management Fund setup and administration Tax consulting Accounting and book keeping

indicators • commodities • forex By Isavella Frangou-Pavlou KAB Strategy (Cyprus) Limited (CySEC License No. 058/05)

Major FX

Major Commodities 52 weeks

52 weeks

Current

Monthly change (%)

High

Low

Current

Monthly change (%)

High

EURUSD

1.3372

-4.05%

1.4940

1.2874

Gold (USD/t oz.)

Low

1696.50

-1.67%

1922.6

1309.10

USDJPY

77.06

-1.18%

85.765

75.560

Sliver (USD/t oz.)

32.08

-7.00%

49.82

23.93

96.53

+4.28%

114.83

74.95

3.46

-11.51%

4.98

3.46

-8.79%

799.50

572.25 577.25

GBPUSD

1.5552

-3.60%

1.6747

1.5272

Crude oil (USD/bbl.)

AUDUSD

0.9731

-8.12%

1.1080

0.9384

Natural Gas (USD/MMBtu)

USDCAD

0.9956

-4.16%

1.0657

0.9406

Corn (USD/bu.)

588.75

USDCHF

0.9182

+5.18%

1.0076

0.707

Wheat (USD/bu.)

579.25

-7.50%

892.50

EURJPY

103.19

-5.07%

123.280

100.73

Sugar (USD/lb.)

25.72

-10.38%

35.62

21.10

EURGBP

0.8607

-0.35%

0.9084

0.8482

Soy (USD/bu.)

1120.50

-6.97%

1456.50

1120.50

1.2294 +1.05% 1.3835 EURCHF (Source: Yahoo Finance. As at 07:00 GMT on 24/11/2011

1.0070

EuroZone 52 weeks

Current

Change

High

Low

GDP (YoY)

1.4%

-0.2%

2.5%

1.4%

CPI (YoY)

3.0%

1.9%

Unemployment Rate (MoM)

10.2%

+0.1%

10.2%

9.9%

Bond yield (10-year) (Italy) (MoM)

6.660%

+13.42%

7.250%

4.340%

Debt/GDP (Italy) (MoM)

120%

113%

Interest Rate (MoM)

1.25%

0.25%

1.5%

1.0%

(Source: Bloomberg. As at 07:00 GTM on 24/11/2011)

The US economy was more upbeat than in previous months, GDP hit a yearly high and the jobs market also improved. Inflation risk is beginning to fade, while the debt issue remains a major issue in the coming months.

By contrast with the US, eurozone economic growth is dulling, with GDP increasing at lower levels and a lack of balance among the eurozone members. The debt problem still prevails with bond yield surging in some countries. The region continues to face stiff challenges.

(Source: Eurostat - http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/ Bloomberg: http://www.bloomberg.com/quote/GBTPGR10:IND)

US MAJOR INDICATORS Current

US Indices 52 weeks

Change

High

Low

52 weeks

Current

Monthly change (%)

High

Low

-8.32%

1370.58

1101.54

GDP(Annualized 3Q)

2.0%

+0.7%

3.8%

0.4%

S&P

1161.79

CPI (YoY)

3.5%

-0.4%

3.9%

1.1%

NASDAQ

2460.08

-9.30%

2438.44

1963.68

Unemployment Rate (MoM)

9.0%

-0.1%

9.8%

8.8%

Dow Jones

11257.55

-6.83%

12928.50

10588.50

131516K

+80K

131516K

130108K

FTSE

5157.70

-6.97%

6105.80

4791.00

DAX

5492.57

-10.56%

7600.41

4965.80

CAC

2822.43

-12.96%

4169.87

2,693.21

Nikkei

8165.18

-9.36%

10891.60

8165.18

Hang Seng

17864.43

-10.07%

24988.60

16170.35

Shanghai

2397.45

-2.87%

3186.72

2307.14

Non-farm (MoM) Bond yield (10-year) (MoM)

1.879%

Debt/GDP (MoM)

99.75%

+1.46%

99.75%

93.2%

Interest Rate (MoM)

0.25%

-0.356

3.74%

1.70%

(Source: US Bureau of Labor http://www.bls.gov/eag/eag.us.htm US Department of Commerce http://www.bea.gov US Department of the Treasury http://www.treasury.gov/Pages/default.aspx)

the international investment, business & finance magazine OF CYPRUS

European Indices

Asian Indices

(Source: Bloomberg. As at 24/11/2011)

USD 1911.30 1872.90 1834.50 1796.10 1756.50 1724.55 1722.30 1679.70 1640.10 1601.70 1563.30 1524.90

15 Aug 2011 24 Aug 2011 2 Sep 2011

12 Sep 2011 21 Sep 2011 30 Sep 2011 10 Oct 2011

19 Oct 2011

Source: KAB-MetaTrader

Gold Gold began to fall in the second half of November after reaching $1,804/oz. The ongoing eurozone debt crisis, which triggered deep worries of a global economic slowdown, led to gold plummeting along with the collapsing euro to below $1,700/oz again and the trend remains uncertain. So far, the successful reorganisation in Greece and Italy mean little in terms of resolving the debt problem. Italy’s 10-year bond yield was once above 7% and surging borrowing costs may beat the already fragile economy. The new prime ministers of both Italy (above left) and Greece (above right) are seeking more help from EU and the ECB, and clear measures are not expected until the beginning of December. Furthermore, the core eurozone countries in are on the verge of crisis; Moody’s has warned on the French rating outlook, saying the second largest economy might be downgraded if its economic growth remains weak and debt yields keep rising.

USD 1283.35 1261.25 1239.15 1217.05 1194.95 11.72.85 1166.78 1150.75 1128.65 1106.55 1084.45 1063.00

12 Sep 2011 21 Sep 2011 30 Sep 2011 10 Oct 2011 19 Oct 2011 28 Oct 2011 7 Nov 2011

16 Nov 2011

US Stocks The bulls of October lost steam in November and we saw bearish fluctuation throughout most of the month. The S&P 500 index fell to 1165.00, losing over 5%. Turbulent headwind caused investors to be more sensitive towards fundamental influences and the European bond market was the major one for the month. 10-year bond yields above 7% for both Italy and Spain indicate an unwillingness to lend money to debt-ridden countries. Meanwhile, the US bipartisan “Super Committee” (pictured left) failed to reach agreement and the deficit problem will further weigh on the stock market in the coming month.

Source: KAB-MetaTrader

1.4255 1.4140 1.4025 1.3915 1.3800 1.3685 1.3570 1.3455 1.3340 1.3255 1.3115 12 Sep 2011 21 Sep 2011 30 Sep 2011 10 Oct 2011 19 Oct 2011

28 Oct 2011 7 Nov 2011

EURUSD

$1.3386

The euro gave up most of the gains earned in October but managed to trade above 1.330. The debt crisis is still dragging the currency down and no certain end is in sight. Although the French 10-year bond yield is rising slowly, it does show that the impact of contagion is still damaging. Meanwhile, Germany has finally suggested “the unspeakable”, the idea of forming a smaller eurozone. The suggestion leaves a door open for “voluntary exits” and the 17-block common currency may become extinct if countries like Italy and Spain are on the list. For the near term, close attention should be paid to European banks, as the currency will devalue sharply if the industry cannot hold up against cash flow difficulties.

16 Nov 2011

Source: KAB-MetaTrader the international investment, business & finance magazine OF CYPRUS

indicators • commodities • forex Iranian president mahmoud ahmadinejad

USD 102.70 99.85 96.70 94.15 91.30 88.45 85.60 82.75 79.90 77.05 12 Sep 2011 21 Sep 2011

30 Sep 2011 10 Oct 2011

19 Oct 2011 28 Oct 2011

7 Nov 2011

16 Nov 2011

74.20

OIL Oil rose for most of November, reaching a monthly high above $100/barrel. The US economic situation is improving remarkably, which raises demand expectations. On the other hand, new concerns over supply, as Middle East strife and the Iran nuclear crisis escalate, will nudge the oil price upward. The US unemployment rate decreased slightly to 9.0% and jobless claims fell remarkably. GDP growth hit a yearly high and the housing market is starting to show signs of recovery. Although Libya is hopeful of resuming oil production in the near future, new Middle East uncertainty – Syria’s conflict, Egypt falling into turmoil again – is stirring fears about the oil supply; while new international sanctions on Iran, which is the world’s fourth biggest oil producer, will inevitably reduce Iranian oil exports.

Source: KAB-MetaTrader

GBPUSD 1.6145 1.6055 1.5965 1.5875 1.5785 1.5695 1.5605 1.5515 1.5425 1.5335

12 Sep 2011 21 Sep 2011 30 Sep 2011 10 Oct 2011 19 Oct 2011 28 Oct 2011 7 Nov 2011 16 Nov 2011

1.5245

Source: KAB-MetaTrader

The pound’s performance was similar to that of the euro in November, evaporating over 50% of its October gains. The closeness between the UK and the EU keeps both currencies in a lookalike trend, with the pound having greater volatility. The situation in the eurozone will continue to affect the movement of Sterling as the British government is lacking ways to boost its economy on its own. The Bank of England is also unlikely to make any greater effort within the year and therefore the improving reading of the economic indicators may not be sustainable in the coming months. On the weekly chart, the pound is in a more prominent downtrend as we see a more orderly falling pattern. The currency will eventually test 1.527 for support as soon as December.

$1.5540

79.45 79.05 78.65 78.25 77.85 77.45 77.12 77.05

76.25 75.85 75.45 12 Sep 2011 21 Sep 2011 30 Sep 2011 10 Oct 2011 Source: KAB-MetaTrader

19 Oct 2011 28 Oct 2011

7 Nov 2011

16 Nov 2011

USDJPY USDJPY was on a solid downtrend in November after the Bank of Japan’s intervention on the last day in October, boosting the pair to a 79.52 high. The Japanese government had been rather quiet about its effort on softening the currency throughout the month making the USDJPY pair trade within a narrow daily range. The flooding in Thailand undid some of the economic improvement since the nuclear disaster, as many Japanese conglomerates set up manufacturing houses in Thailand. Meanwhile, the need for a safehaven currency continues, pushing the pair lower but at a slower velocity in case of another one-off intervention.

info: Isavella Frangou-Pavlou is Sales and Marketing Manager at KAB Strategy (Cyprus) Ltd (CySEC-License No. 058/05) E-mail: isavella@kab.com.cy This research report or summary has been prepared by KAB Strategy (Cyprus) Ltd (CYSEC Licence No. 058/05) and KAB Financial Advisory Ltd from information believed to be reliable. Such information has not been independently verified and no warranty, representation or warranty, express or implied, is made as to its accuracy, completeness or correctness. This report is provided for information purposes only. Nothing in this report should be considered to constitute investment advice. It is not intended, and should not be considered, as an offer, invitation, solicitation or recommendation to buy or sell any of the financial instruments described herein. Leveraged products incur a high level of risk and can result in the loss of all your invested capital. KAB Strategy (Cyprus) Ltd and its affiliates accept no liability whatsoever for any direct or consequential loss arising from the use of this document or its contents.

the international investment, business & finance magazine OF CYPRUS

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the international investment, business & finance magazine of cyprus

opinion

Solving the Problem Austerity measures must be taken despite public opposition

I By Demosthenes Mavrellis

The minister should be supported for his bold and determined stance not to allow the interests of the few destroy the prospects of the many

magine being shipwrecked in the middle of the ocean. You are looking at a raft in front of you. Boarding the raft would probably save you but in order to do so you will need to remove some items of jewellery and finery you have on you to make you lighter. What do you do? Any rational person knows the answer! Which is why it baffles every thinking person as to why the government has so far failed to implement measures to save the Cyprus economy. Everybody knows the causes of the dire economic situation: the extreme cost of the civil service coupled with our banking systemâ&#x20AC;&#x2122;s exposure to Greek bonds. Everybody knows the solution too. As we can do nothing about the latter part of the equation, we need to reduce the cost of the state. We have recently witnessed the absurd scenario of our competent and well-meaning Minister of Finance announcing his intention to promulgate measures that everybody expects to put the economy on the road to recovery, the opposition applauding and his own government undermining him. I am not saying that the measures are perfect; the efficacy of the taxation proposals is somewhat dubious. I refer to the absurd notion of taxing businesses on their turnover when they could be making a loss. However, the idea that civil servants would not receive salary increases from a nearly bankrupt employer, i.e. the state, cannot but make excellent sense. The notion that we need to remove funds from the economy via taxation in order to stop spending is nothing but cheap populism. The only solution is to cut costs and boost investment. It is time for all of us to wake up. The Bank of Cyprus alone has (by its own admission)

enough capital to finance a great part of the national debt. However, no sane banking institution would be reckless enough to finance a government that throws money away just to satisfy the narrow political ideology and smallminded political planning of the governing party. And for the current governing party, political concerns trump the common good. Measures that would reduce state spending and indicate to all those able and willing to consider investing in this country that we can transcend political sclerosis and the mentality of a union state would bring the economy back into a developmental orbit in a very short time. Once we show determination in our goal to balance the books, we can return to the markets and borrow at reasonable rates again. The minister should be supported at any cost for his bold and determined stance not to allow the interests of the few destroy the prospects of the many by surrendering our national sovereignty to the ESFS and risking destroying the tax system which has created our economy. We should not succumb to populist pressure to destroy those who create work for themselves and others but only rein in spending in extremely high salaries and handouts to those who do not need them. The current administration must not be allowed to destroy what we have built in the last 20 years and it must be explained to the people that we need to remove the cancer before it kills the patient. It needs to be explained that the current standard of living in this country, enjoyed by all, is a result of the financial services industry. The viability of our current taxation system, which has created this industry, must not be put in jeopardy to satisfy the public sector unions.

info: Demosthenes Mavrellis is a Partner at Chrysses Demetriades, Advocates and Legal Consultants. 22

the international investment, business & finance magazine of cyprus

the debate

Should Cypriots spend big this Christmas in order to help the economy?” NO!

YES! By Stephan Vikledartin

Few people will doubt the need to boost market sentiment in Cyprus if the economy is to avoid a ‘Greek style’ mentality of self-perpetuating doom and gloom. Within the current economic system, perception may not be everything but a positive outlook counts for a great deal when it comes to future investment and the interest charged on new or existing government loans. In my opinion, moderation is the key. If Cypriots spend like crazy this Christmas, their credit cards bills will probably exceed their ability to pay them off any time soon and so curtail further spending in the New Year (despite boosting Q4 indicators of economic growth). If people do not spend enough, however, we shall end up perpetuating the current downward spiral which may well result in further downgrades by the rating agencies and increase the possibility of requiring an EU bailout. Let’s look at the issue from a mathematical standpoint and make a back-of-the-envelope calculation. Assuming that the population of the Republic of Cyprus is roughly 800,000 and that 60% are qualified to spend some big money for Christmas, this means 480,000 people. If 30% of them are the ‘breadwinners’, we arrive at a number of 144,000. If we agree that a sustainable but generous amount for Christmas giftspending represents an average of €1,000 per breadwinner, this will inject €144 million into the economy. Put into context, this means an additional 1% to the island’s GDP.

If people do not spend enough, we shall end up perpetuating the current downward spiral Distributed spending such as this will trickle throughout the economy to the benefit of us all. Indeed, this extra money could also be equated to: • The expected cost of raising and educating 690 children until university • One month’s salary for 100,000 average paid workers • One month’s salary for civil service and semi-government staff • Cypriot MPs keeping their bodyguards employed for the next 50 years • 3,000 supercars for the privileged 1% (or 400 Rolls-Royce Phantoms if they are really picky) In all seriousness, we should all allow ourselves to spend a little (not a lot) more than we think we should this Christmas and give our embattled retail sector a chance to enter 2012 on a positive note.

By Petros Petrou

We all know the theory: consumer spending leads to more demand, which means more production, which means more jobs and investment, which means the government earns more tax revenues that can then be put back into the economy. Unfortunately, theory and practice are not always in harmony, especially at Christmas time. The traditional time for giving is the time for buying, too, and in most Western economies people’s generosity of Yuletide spirit leads to only one thing: massive credit card debt.

If consumers spend more than their disposable incomes, they are acting irresponsibly, not helping the economy If consumers spend more than their disposable incomes, they are acting irresponsibly, not helping the economy. This applies not only to Cypriots but to everyone on the planet and it is not restricted to the Christmas season. And I doubt that a single person in this country will be persuaded to spend more because they think that by doing so they will be helping to keep Cyprus out of the European Financial Stability Facility. Citizens point to two causes for the current crisis: the government and the banks and they expect the former to find solutions for the problems of the latter. Indeed, it could be argued that, instead of spending, people would actually help the economy more effectively by keeping their hardearned money in the banks, however low the interest rates. If more spending is required to boost the economy, people need to have more money in their pockets. Growth in real wages drives consumer spending, which is the key driver of corporate profits which, in turn, drive the stock market. But no-one is expecting a salary increase in the near future, whatever the teachers’ unions may think, so the idea that those in work (let’s not forget that the island is currently experiencing its highest-ever unemployment rate) should head downtown during Christmas week with a view to maxing out their credit cards is stupid, to put it mildly. Lots of people will doubtless do this but they will be deluding themselves if they think that, by spoiling themselves and their children, they will somehow be helping the rest of us. They may have a merry Christmas but they certainly won’t be doing themselves any favours for 2012.

info: Stephan Vikledartin is a market researcher with Doctorates in Molecular Biology and Physics Petros Petrou is a retired university lecturer in economics 24

the international investment, business & finance magazine OF CYPRUS

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the good life

100 Once-In-A-Lifetime Experiences

the international investment, business & finance magazine of cyprus

By Nathalie Kyrou

hey say the best things in life are free and while that may be true in a sense, who says that money can’t buy excellence or moments of happiness even? After all, if money is no object and you have endless supplies of it, there are plenty of satisfying, thrilling and unforgettable new experiences that it can buy. Forget materialism per se – we’re not talking here about owning a Ferrari or all the gold in the world but rather about how you can enjoy using money as a means of getting to places and of providing you with opportunities to realise your dreams which, without it, may never be more than dreams. So what would you do if you suddenly found yourself with a fortune and lots of time on your hands? Here are 100 Gold ideas to fire your imagination

the international investment, business & finance magazine of cyprus

the good life

SOAR into space

Book your place in space and join over 430 Virgin Galactic astronauts who will venture into the dark unknown. Flights are set to operate from Spaceport America, the world’s first purpose-built commercial spaceport in New Mexico which promises to provide cutting-edge facilities and a wonderful location for fledgling astronauts to realise their dreams. Tickets cost $200,000 and deposits start from $20,000 – well worth it for the fortunate few who will enjoy this out-ofworld experience!

ORDER the world’s most expensive Christmas cake

If you have a really sweet tooth and you enjoy the traditions of Christmas, how about spending $1.6 million (€1.18m) on a Christmas cake? A pastry chef in Tokyo has decided to put this price tag on his diamond fruit cake which took about 6 months to design and a month to create, and is decorated with 223 small diamonds on the exterior (but is otherwise fully edible).

SPEND a night in one of the world’s most expensive Hotels

The most expensive place to stay in the world is the Royal Penthouse Suite in the President Wilson Hotel in Geneva, Switzerland. With 12 rooms and 12 bathrooms, a fitness centre and a Steinway grand piano, it costs €46,019.59 a night. Believe it or not, breakfast is not included.

+9 The self-proclaimed 7-star Burj Al

Dining in a Michelin three-star restaurant is probably the most enjoyable way to put on weight. Three Michelin stars are rare – at present, there are only 96 in the world – and they are traditionally awarded to restaurants offering “exceptional cuisine, worth a special journey”. Try De Karmeliet in Bruges, Belgium at an average price per head of €140 for your meal and house wine.

Arab Hotel in Dubai exemplifies the ultimate in Arabian hospitality. Designed to resemble a billowing sail, it soars to a height of 321 metres and offers duplex suites with Jacuzzis, a chauffeur-driven Rolls-Royce and butlers at your disposal, plus the services of a private shopper while you relax at the spa. The Presidential Suite costs around AED 94,000 (€18,118.66) per night.

+3 If you’re venturing to the Far East go for The Caprice in Hong Kong, located inside

+10 The Langham and The

RELISH Michelin 3-star restaurant cuisine

the Four Seasons Hotel where main courses cost from HK$400-$770 (€40-€75). The authentic French cuisine will make you forget you are in Asia.

+4 In Europe, head to Rome and book a table a La Pergola. This elegant restaurant, voted by many as the best in the city, is located on top of the Cavalieri Hilton Hotel and boasts a spectacular panoramic view. Main courses cost only between €39-59, while fixed price menus are €175-€198.

+5 For the very finest Japanese delicacies, visit Kanda in Tokyo where prices range from $100 to $300 (€75-€225) – sushi at its most supreme! +6 If you are in New York, dine at Per Se, voted the best restaurant in the city by the New York Times. On a typical night, each diner is given the choice of one of two ninecourse prix-fixe menus: a vegetable tasting menu or a chef’s tasting menu, each costing $295 (€218), including non-alcoholic drinks and service.

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Lanesborough hotels in London feature the most expensive suites in Britain. The Langham, which opened in 1865, costs £5,000-£6,000 a night and you’ll pay the same as visiting royalty or heads of state to stay at the Lanesborough, another landmark in impeccable English accommodation.

+11 Book yourself into the Ty Warner Penthouse at the Four Seasons Hotel in New York and spoil yourself in this nine-room suite which has walls inlaid with mother-of-pearl and is adorned with gold and platinum-woven fabrics. Perks include a butler, personal trainer, chauffeur and library. At the top of Manhattan’s tallest hotel, it offers a breathtaking view of the city, which may be why it costs $35,000 (€26,000) for a night’s stay.

CAGE DIVE with

great white sharks

Anyone who’s seen the Jaws movies knows that sharks are not creatures to play with so the idea of being underwater with them is a surefire adrenalin-pumping experience. Cage diving with great whites in the aptly named “Shark Alley” near the fishing village of Gansbaai in South Africa is thrilling but not too expensive at around ZAR1,650 (€150) per person for one day. Just don’t start humming that John Williams theme.

+16 Alternatively, you can lose yourself in the remote Fagara Mountains of Romania at an ice hotel which is reachable only by cable car. The rooms have mattresses on ice beds and covered with reindeer fur and sleeping bags to keep you cosy and warm. The hotel also has an ice bar with glasses made of ice and an ice church is located within walking distance.

LIVE the Playboy

Mansion experience

at an Ice Hotel

If you are looking for an extreme and original hotel experience, you should travel to Jukkasjärvi, Sweden, home to the first and largest ice hotel in the world. Every winter the hotel is built out of ice and snow and artists from 15 countries design the interiors. You can enjoy this icy experience for SEK 2900-5800 (€315€630) a night in a room for two.

+15 Getting married soon? The Hôtel de Glace in Quebec hosts all-inclusive packages, so you can enjoy a fairytale wedding while raising a toast in the ice bar with glasses made of ice! Stay in the premium deluxe theme suite with fireplace and private spa – the largest and most luxurious suite there, perfect for special occasion – for just over $1,000 a night.

DINE underwater in the Maldives

The world’s first undersea restaurant, located at the Conrad Maldives Rangali Island resort, offers guests a chance to dine 5 metres below the surface of the Indian Ocean. Encased in plexiglass, this unique restaurant allows you to marvel at 180° views of reef and marine life while you sip champagne cocktails and sample the 23-dish tasting menu for $300. Arrive there in style by seaplane.

The Hugh Hefner Sky Villa, atop the Palms Casino Resort in Las Vegas, costs about US$40,000 a night, and will give you as close a look at life in the Playboy mansion as you’re likely to get. The 9,000 sq. ft. of exclusive living space includes a fully-equipped gym with a sauna and spa-style treatment room, a media room, a Jacuzzi pool, a full bar and an 8-foot, round, rotating bed. Hef’s girlfriends are not included.

COOL OFF

Cyprus sun. www.polarcruises.com offers vacations on luxury ships, as does www. adventure-life.com, where 12-18 days on a luxury expedition vessel such as Le Boreal costs $10,465.

SLIDE down a volcano

TAKE a zero gravity flight

If you like the idea of floating around weightless, you can take a zerogravity flight for about $5,000. In a specially modified Boeing 727, specially trained pilots perform aerobatic manoeuvres known as parabolas to create a weightless environment that lets you float, flip and soar as if you were in space for approximately 8 minutes. Visit www.Zero G.com for more information.

BOOK a cruise to Antarctica

One of the most inhospitable places of earth, Antarctica is not the most obvious choice for travel but icebergs, mountains and penguins could provide an unforgettably pleasant experience. It’s not cheap to get there and there’s every chance you’ll be hit by a howling blizzard at some point but it will be a change from the

Volcano boarding is not a particularly well-known sport but more and more people are taking what resembles a large skateboard to the top of Cerro Negro in western Nicaragua and then blazing a trail down the 1,600 ft slope at speeds of up to 70kph. It’s exciting but inexpensive – you can go down the volcano and recover in a good hotel for less than €100. This does not include the cost of creams for your sore, gravel-burnt skin due to falls.

ENJOY

a luxury cruise

A niche market featuring highend cruise carriers has emerged recently to cater to those with a taste for luxury combined with travel. On Cunard’s Queen Mary 2, for example, a Canyon Ranch spa, seven restaurants, a programme of shows, plays & lectures, live bands and dancing are available to all passengers. If you choose to stay in one of the Grand Duplex apartments, you can enjoy a private balcony, marble bathrooms and a private butler service for just…$24,249.

STAY in Venice

You may have visited Venice but the chances are that you have not stayed on the actual island itself. The experience of walking the labyrinth at the international investment, business & finance magazine of cyprus

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twilight and spending the night there is worth splashing out on the ultimate luxury accommodation. Stay in an exclusive suite at the Hotel Cipriani with a view of the lagoon and butler service for €4,268 a night and you’ll agree that “La vita è bella”.

CHARTER

the yacht Annaliesse

The $90-million super-yacht Annaliesse, owned by Greek entrepreneur Andreas Liveras, is currently the most expensive private yacht you can charter anywhere in the world. Onboard facilities include a spa with a marble Roman bath, saunas and steam rooms, Jacuzzis, a cinema, a business centre and even a helicopter landing pad. Custom itineraries include the Mediterranean, the Caribbean and the South Pacific. It accommodates 36 people and costs $113,760 per day.

DRIVE

a Formula 1 Car

GAMBLE at the

casino in Monte Carlo

If you have plenty of money, one of the most enjoyable ways to lose some of it is by gambling it away at the world’s most famous casino in Monte Carlo, Monaco. The casino was for many years the primary source of income for the ruling House of Grimaldi and the Monaco economy. Citizens of the Principality are not allowed inside the casino which offers roulette, stud poker, blackjack, craps, baccarat and slot machines. 30

+26 On a much larger scale there is Las Vegas in the US. The largest of the Las Vegas casinos, the MGM Grand, is also one of the most famous hotels in the world. With over 3,500 slot machines and 165 game tables, this giant game floor is always buzzing with excitement. The hotel includes restaurants with world-famous chefs while if you need a break from betting, it also includes a concert hall.

RENT an island

Forget about sailing to or around islands. Why not charter a private island all for yourself and a few friends? Offering endless luxury, Round Island in the Seychelles is a private island where Creole-style architecture blends harmoniously with lush nature. And if you really want to get away from it all, you can have the whole island to yourself for €10,150 per night If you envy Hamilton, Vettel and the rest, driving around a real race circuit in an exGrand Prix Formula One car with a top speed of 200mph is the ultimate experience for any motor racing fan. In order to race the car, however, you must learn how to drive it first. An instruction course, lunch, memorabilia and an F1 certificate are included for the price of £1,600 (€1.860) if you book through www.racing-school.co.uk.

OWN a luxury wristwatch

Patek Philippe has produced almost all of the world’s most expensive watches and a $4 million auction bid for the Platinum World Time Model in 2002 made it the most expensive timepiece of the moment. The company’s creations have been worn by European royalty including Queen Victoria, so if you are prepared to pay the hefty price, you can become a part of history too. And you’ll never have to ask anyone the time again.

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INDULGE yourself at a Tropical Spa Resort

The St. Regis Bora Bora Resort in French Polynesia is probably the closest place to a tropical paradise you can find on water. Known for its exotic array of signature beauty treatments, including a “neuromuscular Taurumi massage”, an “illuminating pearl facial” and a “volcanic pedicure”, it is located on Motu Ome in the Bora Bora archipelago. Indulge yourself for XPF108,000 (€850) a night.

EXPERIENCE

wilderness at a luxury Floatel

Experience extreme wilderness in extreme luxury. Ensconced within the pristine Great Bear Rainforest on the scarily remote western coast of British Colombia, Canada, the King Pacific Lodge is a towering fourdecker barge in the harbour of Princess Royal Island. Each of its 17 palatial bedrooms overlooks a surrounding area bustling with black bears, eagles, otters, sea-lions, humpback whales and orcas. Room rates start at $4,750 for a 3-night minimum stay.

EAT at a Top 10 restaurant

Gourmets with money to burn should head to one of the world’s top 10 restaurants and the 2011 World’s Best Restaurant (according to San Pellegrino) is Noma in Copenhagen, described as “a beacon of excellence which leads to an emotive, intense, liberating way of eating, unlike any other.” Chef Rene Redzepi’s 7-course Nordic menu will set you back DKK 1195 (€160) and the 12-course even more. But you’ll be in culinary heaven.

PAMPER yourself with a gold facial

Using gold in beauty treatments is nothing new and a real gold facial will definitely leave your face with a “golden” glow. At UMO America in Beverly Hills, California, you can experience a 24-carat gold facial mask which, it is claimed, can firm and brighten skin, reduce wrinkles, help drain lymph

nodes and get rid of toxins, stimulate blood circulation, and help skin cells replenish at a faster pace than they would naturally grow.

+33 Diamonds are not just used for jewellery these days; they have become a girl’s best massage accessory too. Hearts on Fire, known for its perfectly cut diamonds, has joined with Spa on Location in Santa Monica, California to bring you the “Dream Girl” Diamond Massage. $1 million worth in loose diamonds are placed along your spine as a therapist gently massages your back.

SAIL to the

Galapagos Islands

There is an incredible mix of marine life on these islands, where visitors can get up close and personal with some of the world’s rarest animals, such as ‘Lonesome George’, the only surviving giant Pinta tortoise, and the endemic Galapagos marine iguana. For a real treat, hire the luxury Grace Motor Yacht which carries up to 18 passengers and costs $5,189 for 8 days and 7 nights onboard.

BUY a bottle of Domaine de la Romanée-Conti Montrachet The world’s most expensive bottle of wine that could actually be drunk today is a Montrachet 1978 from Domaine de la Romanée-Conti that was sold at Sotheby’s in New York in 2001. The lot of seven bottles fetched $167,500, or $23,929 per bottle.

GO on a five-star safari

While pitching your own tent and cooking your own dinner can be a blast, it is hard to compare it to being driven around a private game reserve by expert guides and relaxing in your bungalow before indulging in your chefprepared dinner. Stay in the Homestead villa at Phinda Private Game Reserve in KwaZulu-Natal for ZAR49,000 (€4,400) per night.

PURCHASE

a Noble Title

+38 Fly first class with Emirates to Johannesburg, South Africa and enjoy an inspirational stay at the Singita Boulders Safari Lodge in one of only 12 luxury suites on an all inclusive basis at ZAR11,875– 12,250 (€1,050-€1,100) per night.

39 You may not have been born into royalty, but if you have enough money, you can purchase the equivalent of a blue blood transfusion. www.nobility. co.uk is the place to go if you want to become a genuine Baron/Baroness, a Count or Marquis, a Duke or an Earl or even a Prince/ Princess. The latter costs £250,000. “Add to cart and proceed to check-out”! Your investment includes investiture in a castle with up to 40 guests, full regalia and crown.

REVEL in a night at the Opera

Opera is considered by many as the ultimate performing art, combining music and theatre, and the Teatro alla Scala in Milan is arguably the most famous opera house in the world, where virtually every top opera singer hopes to appear one day. You can find good seats to most performances for under €200.

+40 In London, it is always worth booking seats for a performance at the Royal Opera House in Covent Garden but the best seats are the most expensive in the world, at over £200 (€230).

+41 If you’re in New York, the Lincoln Centre for Performing Arts is the place to be. Home to the Metropolitan Opera, it is probably the best place in the world to see and hear the most famous opera singers. $350 (€260) will get you a front row seat. the international investment, business & finance magazine of cyprus

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SKI in ultimate style

Vail Mountain in Colorado features some of the world’s most expensive ski resorts, including the Game Creek Chalet where $2,800 per night will bring you accommodation, a fireplace and outdoor tub, night skiing, meals prepared by a private chef, all beverages, ski lift tickets and a morning mountain guide during the winter, maid and concierge service, and perhaps most important of all, a ski instructor.

+51 The most expensive, and arguably the most exclusive, ski resort in Europe, is France’s Courchevel 1850 which boasts

HIRE a celebrity to give you a Private Concert

Forget searching for hard-to-get concert tickets. If you can afford it, you can hire your favourite artist to perform exclusively for you and your friends. Many superstar musicians are willing to play for amounts ranging from five figures to millions. Christina Aguilera gave a private concert in Spain for €2.4 million this summer, while a few years ago Tom Jones and Rod Stewart both performed at a private party at the Anassa Hotel in Cyprus.

WEAR Haute Couture

If you are a woman who can afford it, there is no reason to buy massmarket or ready-to-wear clothes. You should go for haute couture from a designer who will create an exclusive model for you. Prices in Paris, the capital of designer fashion, can range from €12,000-€15,000 while a grand evening dress can cost up to €45,000, sometimes even more. At least you’ll have no more worries about someone else wearing the same dress.

CELEBRATE New Year’s Eve in Style

Forget about waiting for the ball to drop in New York’s Times Square. There are many interesting ways to celebrate the New Year including singing folk songs 32

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some of Europe’s ritziest chalets. You can pay €1,300 a night for one of the best, but it accommodates 10 people. Another French resort, Méribel, is favoured by the younger members of the British royalty, while St Moritz in Switzerland, is another popular European resort.

+52 Aspen Mountain in Colorado, America, and its famous black-diamond terrain offering a variety of glades, bumps and steeps, is one of the most well-loved places to ski in the States. Visit www. coloradoski.com to book your trip for this winter.

around the bonfires of Reykjavik, dancing the night away on the beaches of Goa, or watching fireworks in magnificent settings that include Table Mountain, Niagara Falls and the Austrian Alps. One of the world’s most famous fireworks displays is set against the iconic backdrop of the Sydney Harbour Bridge in Australia.

+45 Venice is a wonderful place to welcome the New Year with music and fireworks in St. Mark’s Square, culminating with a communal kiss at midnight, and a concert at the La Fenice Theatre or the Golden Opera New Year’s Eve performance, which is followed by a party that lasts until dawn, when locals watch the sunrise and even take a chilly dip at the Lido Beach.

+46 If you really want to be different, how about experiencing the Chinese New Year instead – a lively affair where millions fill the streets to celebrate peace and happiness. Or travel to India to experience the spectacular lights and fireworks at the five-day Festival of Light (Diwali), marking the start of the New Year for Hindus.

SAMPLE the world’s most expensive dessert

With a price tag of $25,000, the Frrrozen Haute Chocolate is made from a blend of 28 cocoas from around the world and is infused with five grams of edible 23-carat gold and served in a goblet lined with edible gold. It is topped with whipped cream, more gold and a side of La Madeline

au Truffle from Knipschildt Chocolatier, which sells for $2,600 a pound. Try it at the New York restaurant Serendipity 3.

FLY in ultimate luxury

Singapore Airlines, Emirates and Etihad offer the most exclusive air travel you can imagine. Onboard the former’s A380 are personal SkySuites, where you can sleep on a distinctively designed, single or double bed, fitted with fine designer linen. The “Book the Cook” service allows meal selection in advance, and you can order Dom Perignon with dinner. The other two airlines also epitomize the idea that it is the journey, not the destination, that counts.

CATCH a top

West End or Broadway show

London and New York are acknowledged as being the world’s top cities for theatre and despite rising prices, the most successful shows are packed every night for months and, in some instances, years. In recent years, some of the most successful cinema actors have performed to great acclaim on the London and New York stages. Stalls/orchestra seats for Mamma Mia!, for example, will cost you around €100 in both cities.

ENTER the draw

for the New Year’s Concert in Vienna

The Vienna Philharmonic Orchestra’s annual New Year’s concert is great on

TV but being there is something else. Booking a seat for the world’s most famous single concert, however, is no easy matter. Every year between January 2 and 23, you can register to be included in a draw for tickets to the next concert. If you’re chosen, the most expensive seats are €940. Unforgettable music.

DRESS UP for the Venice Carnival

Every year 30,000 visitors go to Venice each day during carnival. The most famous element of the fancy dress costumes here is the mask and one of the most important events of the carnival is the competition during the final weekend for the best mask. A jury of international costume and fashion designers votes for “La Maschera piu bella”. Fun to watch, fun to participate.

TASTE a $1,000 ice cream

The Golden Opulence Sundae at Serendipity 3 in New York is made to order and requires a 48 hours’ notice, since ingredients are flown in from different parts of the world. The sundae, which costs cost $1,000, is topped with edible 23-carat gold leaf and sprinkled with tiny flakes of gold. Floral decorations that take up to 18 hours to create are placed on the sundae which is served in a crystal goblet.

GET an expensive haircut

According to the Guinness Book of World Records, the World’s Most Expensive Haircut cost £8,000 and

was given by London hair stylist Stuart Phillips. In fairness, the price included a first class airfare from Italy to England plus limousine service, a champagne lunch and basically anything within reason that the client, a Ms. Lateo, wanted. The salon in London’s Covent Garden is frequented by international celebrities who are more likely to pay around €200.

+58 For a celebrity haircut at New York’s Orlo Salon, stylist Orlando Pita will charge you $800 if you are lucky enough to get an appointment (he spends a lot of time working on hair for fashion shoots and shows for designers such as Oscar de la Renta and Vera Wang). Clients such as Madonna, Gywneth Paltrow and Anne Hathaway will doubtless be given priority.

DRESS DOWN

for the Carnival in Rio

The biggest carnival party in the world takes place in Rio de Janeiro, Brazil, with two million people out on the streets every day. The carnival parades of people and floats from the various competing samba schools are famous the world over, especially for the women’s dazzling, scanty costumes which often leave little to the imagination. Synonymous with the energetic, free-spirit nature of the Brazilian people, the Rio Carnival is not for the shy, retiring types.

INVEST in a work of art

The most expensive paintings ever sold belong mostly to Pablo Picasso, Vincent Van Gogh and Andy Warhol and unless you are a billionaire it’s unlikely that you will ever own one. However, you can certainly buy works of art that you like or works that the experts tell you will appreciate in value. Leading galleries in all the world’s big cities will point you in the right direction of the next big name.

TRAVEL on the Orient Express

Whether you board it for a once-in-a-lifetime journey or a shorter trip, you will really feels as if you are stepping

back in time. The classic Orient-Express train journey, from Paris to Istanbul via Budapest and Bucharest, departs just once a year and lasts 6 days and 5 nights. Single occupancy of a double cabin costs £5,380 and shared occupancy of a suite cabin £8,130. Prices are going up in 2013 to £5,700 and £11,000.

HAVE a suit made by a Savile Row tailor

For a man, having a suit madeto-measure on Savile Row is the ultimate tailoring experience. This shopping street in central London is famous for its traditional men’s bespoke tailoring and its customers have included Winston Churchill, Lord Nelson and Napoleon III as well as Sean Connery, Bryan Ferry, Michael Caine, and Tom Cruise. Prices start at £1,500 and can go up £10,000 for very exclusive materials.

DARE to go heliskiing

British Columbia offers a Platinum Heli-Skiing Season Pass for CDN $100,000 (€72,000) making it the world’s most expensive ski lift ticket. But this is no ordinary ski lift. The pass guarantees the holder a seat on one of GCH’s A-Star B2 helicopters to provide unlimited “vertical access” to the world’s best deep powder skiing in the heart of the Purcell and Selkirk mountain ranges.

WATCH the Men’s Singles Final at Wimbledon

A Platinum Hospitality Package on Centre Court for the Men’s Finals in 2012 brings you much more than tennis: strawberries and cream (of course), champagne, a gourmet four-course lunch, a selection of fine wines and liqueurs, afternoon tea and an experienced hostess service. It costs £4,495 (€5,230) per person. Interestingly, in these times of sexual equality, the equivalent for the Ladies Finals costs only £1,450 (€1,690)!

+64 The French Open, named after the famous French aviator, Roland Garros, is the premier clay court tennis tournament in the world and the second of the four annual Grand Slam tournaments. It is held in Paris over two weeks in May-June.

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+65 The Australian Open is the only Grand Slam tennis tournament held in the southern hemisphere in Melbourne, Victoria. Another must-have experience for tennis fans, especially since it is a great place to get away to in winter, as it takes place in the Australian summer month of January.

TAKE tea in the Sahara

The Adrère Amellal eco lodge allows guests to experience the freedom and beauty of the unspoilt Sahara desert. With no electricity, no Internet and no phone signal, you’ll soon be appreciating the sunrise over the sand dunes and discovering the ancient Siwa way of life. The lodge is a 10-hour drive from Cairo and costs $500 per night but it is well worth it, especially if you are a bit of a nomad.

+66 The US Open Tennis tournament, held over a two-week period in AugustSeptember at Flushing Meadows, New York, is the largest of the Big Four Grand Slam events when it comes to seating capacity. The Arthur Ashe Stadium, which has a capacity of 23,200, is the largest tennis venue in the world.

SIT IN on a top fashion show

You don’t have to be a model, fashion journalist or even crazy about fashion to enjoy one of the catwalk shows during the world’s most prestigious fashion events. Men and women can attend shows at Fashion Week in New York, Milan, Paris and London – the main problem is finding tickets but more and more credit card companies and leading hotels are offering special deals on fashion shows.

PARTY like an oligarch in Moscow

Moscow is reputed to have the highest number of billionaires in any one city and as a business hotspot, nearly all its hotels are high-end establishments, catering for those on expense accounts. The RitzCarlton Suite of the Ritz-Carlton Hotel with its unparalleled view of Red Square and St. Basil’s Cathedral is the place to stay and from there you can hit the nightclubs and party your heart out. Be ready to pay US$18,000 per night.

BUY a mansion for

you and all your family

A number of luxury properties, with extravagant amenities to match, are currently on the market awaiting new multimillionaire owners. They include the 1,705-acre Jackson horse ranch in Wyoming which has a $175 million price 34

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tag. Not cheap for a main residence with only three bedrooms. If you prefer the city, the glamorous Woolworth Estate situated on New York City’s famed Upper East Side can be yours for $90 million.

DRESS to impress at Royal Ascot

“Off the shoulder, halter neck, spaghetti straps and dresses with a strap of less than one inch and miniskirts are considered unsuitable. Midriffs must be covered and trouser suits must be full length and of matching material and colour. Gentlemen are required to wear either black or grey morning dress, including a waistcoat, with a top hat.” You can also watch the racing.

+71 If you prefer something a little less fancy, but just as enjoyable, the Kentucky Derby is one of the USA’s oldest thoroughbred horse races, and a real treat for horse-racing fans.

+72 The Prix de l’Arc de Triomphe in France is also open to thoroughbreds aged three years or older. It is arguably the most prestigious horse race in Europe and one of the most renowned international events in any sport.

LET Dr 90210 perform cosmetic surgery on you

Cosmetic surgery is more commonplace than ever before, thanks in part to TV shows such as Dr 90210 and high-profile surgeons like Dr. Robert Rey. If you have the money and you’re not happy with your appearance, why not correct your flaws through liposuction, breast augmentation, a facelift or a tummy tuck? And see Dr. Rey’s smile when you come round…

JOURNEY

to Timbuktu

Yes, Timbuktu does exist, in the West African nation of Mali to be precise. A city of near-mythical status, synonymous with being almost impossible to reach, it boasts a heritage of scholarship that has produced an astounding number of ancient manuscripts, almost 20,000 of which are housed in the Ahmed Baba Institute of Higher Islamic Studies and Research.

SHOP for Shoes

Jimmy Choo, Roger Vivier, Manolo Blahnik, Gucci and Louis Vuitton are names to drive most women crazy, especially when those names are inside a pair of shoes. But if you want real exclusivity, slip into a pair from the House of Borgezie, handcrafted from solid gold and encrusted with 2,200 brilliant cut diamonds. Yours for £140,000 (€164,000).

BALLOON Safari

BE a jet fighter pilot for a day

over the Serengeti (Tanzania)

Maverick or Goose? Top Gun references aside, these day you really can fly a fighter jet. Choose from the MiG-29, L-39 Albatross and Hawker Hunter to finally realize those childhood or Tom Cruise-inspired dreams. MiGFlug is available in Russia, the US, the UK and other European countries and it lets you sit in the second cockpit and enjoy performing manoeuvres like loops and rolls and even breaking the sound barrier Visit www.migflug.com for more info.

Experience natural wilderness over Tanzania with a bird’s eye view. A hot air balloon ride anywhere is one of the most relaxing and memorable experiences you will ever have but this particular view from above is unparalleled. The one-hour flight ends with champagne followed by a full English breakfast. Go to www.balloonsafari.com to book this once-in-a-lifetime safari flight.

+77 To change the perception that Louis Vuitton is a woman’s brand, in 2010 the fashion house launched a pair of Louis Vuitton shoes for men. The handmade shoes of waxed alligator leather with a glove-soft leather lining cost €7,400.

DRINK the world’s

most expensive Cognac

After buying a 8kg, 100cl. bottle of Dudognon Heritage Cognac Grande Champagne you will need a stiff drink! The crystal bottle, dipped in 24k yellow gold and sterling platinum, is emblazoned with 6,500 certified brilliant-cut diamonds and hand-crafted by master-jeweller, Jose Davalos. The Cognac itself has been aged for 100 years to produce an alcohol content of 41%. Yours for only €2.5 million.

BID at a Sotheby’s auction

“Gone to the gentleman/lady in the front row!” If you’d like to be the lucky purchaser of a work of art, a case of fine wines, or some handwritten song lyrics by your favourite songwriter, Sotheby’s (with 90 auction houses in 40 countries) is the perfect place to enjoy the excitement of bidding at a live auction. The secret lies in knowing when to stop.

RELAX in a palace

of salt

Set on the eastern shore of the Great Salar de Uyun in Bolivia is the Palacio de Sal, with walls, floors, beds and chairs made entirely of white rock salt. It’s a great for stargazing at night and watching the colours of sunset reflect off the salt lake. Room rates start at an affordable $100 a night per person.

SEE the World Cup from your own box

If you are a football fan, having your own box at the World Cup Final is the ultimate dream (second only to imagining that you are playing and scoring the winning goal). Like the Olympic Games, this event comes round only once every four years. The most expensive tickets for the 2010 World Cup in South Africa cost $6,000 for the final matches proving that like so many others, ultimate sport experiences do not come cheap.

VIEW the Northern

Lights

The Aurora Borealis (Northern Lights) is one of the most amazing natural sights in the world. Travel to Northern Scandinavia or Canada between November and April for the best chance of seeing this fantastic electromagnetic natural phenomenon light up the skies. Some firms combine this with a stay in an ice hotel

BATHE in a Hot

Spring in Iceland

There are many ways to enjoy exotic bathing in hot springs, and the many countries renowned for them include Israel, New Zealand,

Chile and Japan. Iceland is known for having a large variety of natural hot baths, geothermal pools and spas all around its rugged scenery. Visit www. extremeiceland.is and take your pick of the healthy vacations on offer.

Amazon Rainforest

at the North Pole

WALK over the

The 500 metre-long Canopy Walkway in Iquitos, Peru, offers you a unique view of the Amazon rainforest from the treetops as you walk 35m above the ground for a bird’s eye view of jungle wildlife and vegetation. Before and after, stay at Ceiba Tops, the only luxury jungle lodge on the Amazon River, with airconditioned rooms and cottages, private bathrooms and a swimming pool.

BUILD a snowman

Fly from either Moscow or Longyearbyen to Ice Station Borneo, from where you will take a 40-minute helicopter trip to the North Pole. You have about two hours on the ground to take pictures, build a snowman, and “hug the terrestrial axis” – a pole that Russian tour operators have installed in the ice for the purpose. Then it’s back to Borneo for lunch, champagne and your return flight. North Pole in a Day costs around $18,000.

DANCE at a Ball in Vienna

Thanks to Johann Strauss, Vienna is the Waltz capital of the world and even today more than 300 balls take place in Vienna, many of them in the Hofburg Palace. The ball season reaches its peak in January and February and tickets for the most popular ones cost up to €250. the international investment, business & finance magazine of cyprus

the good life

VISIT Machu Picchu

Often referred to as the “Lost City of the Incas”, Machu Picchu is the most important attraction in Peru and one of the world’s most impressive archaeological sites. Built on the summit of Machu Picchu (Old Peak), overlooking the deep canyon of the Urubamba river, it remained undiscovered until 1911. It is thought to have been a sanctuary or temple inhabited by high priests and the “Virgins of the Sun”.

EXPLORE Tierra

del Fuego

Explore the magnificent vistas and fascinating history of Tierra del Fuego, at the southern tip of Patagonia, with the Argentina Patagonia city of Ushuaia as your base. Hike to the top of Cerro Cortez for a view of the rugged landscape of Tierra del Fuego National Park, explore two of the Beagle Channel islands, visit a penguin rookery and more. If you enjoy walking, this will be unforgettable.

SAVOUR a meal

in the world’s most expensive restaurant

If you have expensive taste in food, Masa is known as New York’s most expensive restaurant, with a tasting menu costing $480 to $680 (€355-€500) per person. This tiny place presents you with a wondrous sushi-based seasonal array, which can be accompanied by 10 year old sake, at $480 (€355) a bottle.

+94 The world’s costliest place to eat is in

ATTEND

the Olympic Games

Contrary to what most people think, there are still tickets on sale for the men’s 100-metre finals at the 2012 London Olympics. They are part of hospitality packages which provide vintage champagne, fine wines, canapes, and multi-course dinners for £4,500 per person. For an event that is expected to last less than 10 seconds, it needs to be a special experience.

LISTEN to Mozart in Salzburg

The Salzburg Festival is a prominent festival of music and opera held every summer (for five weeks starting in late July) in the Austrian town of Salzburg, the birthplace of Wolfgang Amadeus Mozart. Listen to the finest orchestras in beautiful surroundings and, if you can make it to a premiere performance, you may find yourself rubbing shoulders with the world’s highest profile classical music lovers. 36

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Gstaad, Switzerland. Although the food at the mountaintop restaurant (reached via a private ski lift) of the Eagle Ski Club is not notably expensive, you have to be a member to dine there… and membership costs $50,000! If you make it through stringent vetting procedures and the three-year waiting list, you may end up dining alongside Hollywood regulars and royalty.

+95 In Italy, you won’t be put off by other diners at Solo Per Due, which means “just for two”, as this is the world’s smallest restaurant – with just one table, for two – and yet meals still cost $426 per person! Sample delicious, local and seasonal Italian cuisine and tinkle the silver bell to summon the waiter. If this doesn’t feel lavish enough, you can order a personal firework display and hire a Ferrari to get you there and back.

GO shopping in Jermyn Street

In the heart of St. James, one of London’s most historic and fashionable districts, lies Jermyn Street, which dates back to 1664, when Charles II authorized Henry Jermyn, the Earl of St. Albans, to develop an area close to St. James’ Palace. It has flourished ever since and has a worldwide reputation for high quality British artistry and craftsmanship.

PERFORM

an Everest Skydive

If jumping out of an aeroplane is not adventurous enough for you, why not experience the self-proclaimed “world’s most elite skydiving adventure” in Nepal? You will not only jump from 29,500 feet, higher than the summit of Mount Everest, but freefall past the world’s highest mountain and enjoy the sight of those struggling to make their way up and down on foot. Why climb when you can fly?

GLAMP in Australia

Solar-powered mod cons and bush butlers await in World Heritage sites around Australia, such as Longitude 131, just 10km from Uluru (Ayer’s Rock). Glamour camping, or “glamping”, means that you no longer have to rough it to enjoy the bush. These lowimpact tented camps combine a wilderness experience with five-star comforts which is probably the ideal blend for most of us. For more information visit http://goglamping.net

RECORD

your own CD

Reckon you have a talent that isn’t appreciated? Or perhaps you just like to sing. There are plenty of recording studios in the UK that will make you feel, and sound like a star. Choose from of over 9,000 backing tracks to sing to. Once it’s recorded, you’ll be presented with the result on CD. For €250 you can record two songs in a 3-hour session. For more information visit www. experiencemad.co.uk

100 GIVE to charity

No matter how many of the experiences on this list you get to try, it could be argued that the most amazing, satisfying feeling you can ever have will come from helping others and truly making a difference to their lives. And it will doubtless give you longer-lasting happiness too.

opinion

Passports - moving with the times For many years there has been a steadily rising trend among Australians towards international travel

By Trevor Peacock

Gone are the days when passport applicants could smile into the camera – the accurate collection of biometric data necessitates a serious expression!

ustralia’s first passport was produced in 1901, soon after the federation of the Australian colonies, and was apparently issued (though records are uncertain) to Mr John Edward Briscoe, a Melbourne businessman who wished to travel to Europe via the TransSiberian Railway. Mr Briscoe’s passport was a small, symbolic step in the global projection of a distinctively Australian identity. The passports that Australians receive today differ dramatically from those first passports of 1901. Most noticeably, today’s passports include a microchip containing electronic data about each passport holder. But this most obvious difference, affecting the look, feel and handling of the Australian passport, is only one of many changes that have been made to keep it a contemporary document, meeting the demands placed on it by the modern world. For one thing, the passport became more difficult to obtain. A royal commission into drug trafficking in Australia in the early 1980s found that the relative ease of obtaining passports had facilitated criminal activity. That was very quickly changed and the most stringent requirements to prove an applicant’s entitlement to a passport (by birth or acquired citizenship) and his/her identity were imposed. Australians sometimes complain that these requirements are onerous but they are necessary for Australia to be able to preserve and demonstrate the integrity of its passports. Another fundamental change occurred in 2005 when the then Foreign Minister Alexander Downer announced the adoption of biometrically-enabled electronic passports. These have a microchip embedded in the centre page, containing the digitised facial image and personal details of the passport holder. This can be digitally compared with the passport photograph to check that the two images are of the same person. Gone are the days when passport applicants could smile into the camera – the accurate collection of biometric data necessitates a serious expression! Australia was one of the first countries to adopt e-passports, responding

info: Trevor Peacock is the Australian High Commissioner to Cyprus 38

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to the need for ever more integrity and certainty, in order to combat terrorism and other international crime. The new passports also streamline the movement of passengers through airports with the appropriate technology, such as Australia’s SmartGate automated entry system. Passports also need to keep up with social change. Accordingly, in September 2011 Foreign Minister Kevin Rudd announced changes to make life easier for passport applicants who are sex and gender diverse. Trans-gendered Australians are now able to obtain passports in the gender with which they identify, regardless of whether they have undergone sex reassignment surgery, or they may avoid nominating a gender altogether, so long as this is supported by an appropriate statement from a medical practitioner. The amendment significantly reduces the administrative burden for sex and gender diverse people to obtain a passport that reflects their gender and physical appearance, and is in line with the Australian Government’s commitment to remove discrimination on the grounds of gender identity and sexual orientation. Another challenge to the Australian passport system has been the sheer volume of production, to meet continually increasing demand. For many years there has been a steadily rising trend among Australians towards international travel. In 2000, 1.4 million Australian passports were issued and this figure has now risen to 1.8 million passports a year. More than 10 million Australians, just under half the population, currently hold Australian passports. Here in Cyprus, the High Commission serves a community of around 4,000 Australians as well as travellers. We receive about 500 passport applications a year, or 10 a week. Although Australian passports are produced in Australia, we fulfil our commitment to issue the passport within 10 working days – but only to those who meet the requirements. Given the many changes of the past three decades, it is safe to say that those requirements might change again in the years ahead and that further social changes might demand bold new responses in the passport system.

SPECIAL FEATURE: TRUSTS

Put your Trust in Cyprus International Trusts Cyprus Trusts at a Glance

By Peter G. Economides, FCCA, TEP Chairman, STEP Cyprus

n simple terms, a trust is an arrangement whereby money, property or other assets are owned and managed by a person or a company for the benefit of another. At the time of its inception in 12th century England, the trust was intended to simply regulate the succession of family wealth. This was achieved by the holding of assets by trusted and dependable friends or other parties to protect these assets against unscrupulous wives and spendthrift children or confiscation by third parties. They were used extensively at the time of the Crusades by departing knights who placed the management of their English estates in the hands of trusted friends whilst they were away fighting in faraway parts of the world. Since then, however, the trust has evolved 40

into an extremely versatile and highly efficient tax planning vehicle. Over the last 50 years or so, the concept of the trust has been extended to include commercial transactions and it is now used to improve tax planning, cover the risk of disability, manage probate risk and simplify asset management, gift planning and more. Today, the trust is used to deal with a wide range of international financial and legal problems. Whilst the concept of the trust is essentially an Anglo-Saxon device, many western countries with different legal codes, such as Napoleonic, Roman, Dutch or Greek-based legislation, have now formally recognised the trust instrument by way of the Hague convention.

the international investment, business & finance magazine of cyprus

The Makeup of a Trust The various types of trust vary in complexity but they have one common fundamental feature. A “person” being either an individual or a legal entity, called “the trustee” agrees to hold certain assets, known as “the trust fund” in its name for the benefit of another person, called “the beneficiary,” on certain terms and with certain powers, which are usually set out in the “trust deed.” The trust is established by “the settlor” by way of gift of assets to be held by the trustee in accordance with the former’s intentions. The assets comprising the trust fund are legally held and registered as owned by the trustee and the trustee is under a duty, enforceable in the Courts, to hold those assets and the income arising from them for the benefit of the beneficiary(ies).

What’s in a Trust A wide range of property can be held in trust. Such trust assets may comprise of cash, bank deposits, shares, jewellery and real estate. Segregated accounts are kept for each trust client in order to give an additional level of security to clients.

Cyprus International Trusts Over the years, Cyprus has become a popular trust jurisdiction as it offers a very attractive international trust regime. There are now three types of trusts on offer in Cyprus: The Local Trust, the Offshore Trust and the Cyprus International Trust (CIT). The CIT is by far the most popular type of trust on the island and the one most foreigners use. CITs enjoy complete confidentiality and are completely tax exempt in Cyprus. Specifically, the incomes and gains of a CIT derived or deemed to derive from sources outside the Republic of Cyprus are completely exempt from all taxes in Cyprus. The assets and property belonging to a CIT are not subject to estate duty while distributions made to its beneficiaries are not subject to any Cyprus withholding tax. This is good news for non-Cyprus resident settlors and beneficiaries who can continue to use Cyprus to accumulate trust income without liability to any tax whatsoever. The International Trusts Law

69/92, which complements the Trustee Law CAP193 and is based on the English Trustee Act 1925, regulates the creation and operation of Cyprus International Trusts. It provides that the income and gains of an international trust derived from sources outside the Republic are exempted from all kinds of tax in Cyprus and no estate duty is chargeable in respect of assets belonging to an international trust. In fact, the only charge payable to the Cypriot Inland Revenue in respect of an international trust is a one-off stamp duty of approximately €427 payable when the trust is created.

How to Set Up a Trust In order to set up a Cyprus International Trust, the following prerequisites must be met: • The settlor must not be a resident of Cyprus • The beneficiary must likewise not be a resident of Cyprus (charitable institutions are an exception to this rule) • The trust property must not include any immovable property in Cyprus • A minimum of one trustee must be a Cyprus resident

Latest Developments on Trusts Cyprus is gearing up to amend its aging International Trusts Law in an effort to further boost its competitiveness and remain on the same playing field with global and regional competitive jurisdictions. Already, the relevant amendment to the law is in the hands of the Parliamentary Committee on Financial and Budgetary Affairs, the members of which recently pledged to unanimously pass it pending an Attorney General ruling over its EU compliance, hopefully before the end of the year. The proposed changes to the Trust law include, inter alia, the introduction of efficient “firewall” provisions and modern

jurisdictional protection clauses that address the security concerns expressed by existing and new non-resident settlors. The amendment also clarifies that residents of Cyprus are not allowed to set up an international trust, while such trusts may even hold immovable property on the island. The amendment also addresses issues of confidentiality, trust duration, the application of foreign jurisdictional laws and more. The proposals are in compliance with EU law and directives and take into account the realities of the Cyprus economy today. At the same time, the long-discussed and deliberated-upon Fiduciary Service Providers Bill of 2010 has resurfaced and is scheduled to be tabled before the House of Representatives soon.

Cyprus can compare favourably with most trust jurisdictions worldwide This Bill focuses on regulating corporate service providers and trustees in an effort to harmonize Cyprus with the relevant EU directives. The responsibility for this law and related regulation of fiduciary service providers is now vested with the Cyprus Securities and Exchange Commission (CySEC). In many cases, trusts will maximize the tax benefit of prudent investors who can organize their business matters in a way that best suits their particular circumstances and needs. Cyprus can compare favourably with most trust jurisdictions worldwide, and Cyprus International Trusts provide a very efficient means of organising and protecting the businesses and assets of settlors worldwide as well as protecting the interests of their loved ones.

The Society of Trust and Estate Practitioners (STEP) was founded in 1991 in the U.K. and today is the leading worldwide professional body for practitioners in the fields of trusts, estates, and related issues. STEP has more than 17,000 members in 66 countries. The Cyprus branch of STEP was established in 2003 and local membership numbers now exceed 165 professionals.

STEP (Cyprus) P.O. Box 53646 3317 Limassol, Cyprus Tel: + 357 25866560 Fax: + 357 25866561 e-mail: info@stepcyprus.com Website: www.stepcyprus.com

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SPECIAL FEATURE: TRUSTS

Abacus

bacus Limited (“Abacus”) was established in April 2001 after a spin off from PwC and is today a prominent professional services firm in Cyprus and the leading provider of International Business Services in the fields of business advisory, corporate structuring, accountancy, fiduciary, and corporate administration to clients worldwide. We started with a vision to do things differently! We wanted to be independent and conflict-free, and constantly question, challenge and transform outdated business models. We are not, and do not strive to be, the largest accounting firm measured by number of offices or professionals. Our goal is to be the firm of choice for clients with respect to their most challenging compliance issues, most significant international business transactions and most critical tax planning and corporate structuring needs. With offices in Nicosia and Limassol and over 150 exceptional employees from 20 countries, we serve multinational private, public and listed corporations and high net-worth individuals from over 40 countries, including several Fortune 100/500 companies and some of the world’s most recognizable names. We are an amazing crowd of visionaries and doers, striving to systematically create value for our clients, our employees and our society. We are Abacus! 42

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Abacus Services Abacus provides the following general services: • Establishment of legal entities in Cyprus and other jurisdictions • Fiduciary Services • Advisory Services • Accounting Services • Corporate Administration Services • Corporate Secretarial Services • Banking Services • Fund Administration Services • Escrow Agent Services • Trust Administration Services • Shipping Services • Liquidations and strike offs • IT Support • Payroll Services

Trust Services Serving Global Families A trust is a powerful estate planning tool and the most widely-used form of wealth structure for people throughout the world. The structures into which wealthy individuals can transfer their assets can have lasting consequences for them and their families and it is crucial that they choose the right ones. Cyprus International Trusts can protect assets and give lasting benefits in an uncertain world. Our expertise is in helping clients with the establishment and administration of the right wealth structure or combination of structures. To find which combination is best for each

client, we work closely with them to understand their unique needs and circumstances. Working in partnership with our clients’ international legal and tax advisers we will design, implement and maintain the structure(s) best suited for them and their families’ needs. As a business line within Abacus, our Trust department has a tradition of excellence in the provision of trust services. As a result, we are able to act for many of the world’s most influential high net worth individuals, entrepreneurs, families and senior corporate executives. With a quite substantial portfolio of private client assets under administration and an exceptional, dedicated team of trust professionals, we are one of the largest and most versatile fiduciaries in Cyprus.

Abacus Limited

Address: Elenion Building, 2nd floor, 5, Themistocles Dervis Street, 1066 Nicosia, Cyprus Year of Establishment: 2001 Number of Employees: 150 Tel: +357 22555800 Fax: +357 22555801 e-mail: abacus@abacus.com.cy Website: www.abacus.com.cy CEO: Nicos C Nicolaides, Managing Director Head of Trust Department: Petros N Demetriou, Director

EVERY SINGLE MOVE NEEDS FOCUS, EXPERTISE AND EXPERIENCE. Every day, major multinational public and listed corporations, institutions and high net worth individuals, from over 40 countries worldwide, rely on our deep industry expertise and unmatched experience. We deploy the combined capabilities and dedication of our 150+ exceptional people, from over 15 countries, to find the right International Business Solutions and to help our clients seize opportunities.

ABACUS. THE LEADING INTERNATIONAL BUSINESS ADVISORS IN CYPRUS. Truly International. Truly Professional. Truly World Class.

www.abacus.com.cy ELENION BUILDING, 2ND FLOOR. 5 THEMISTOCLES DERVIS STR., CY-1066 NICOSIA, P.O.BOX 25549, CY-1310 NICOSIA, CYPRUS. TEL: +357 22555800, FAX: +357 22555801 ARIANTHI COURT, 2ND FLOOR. 50 AGIAS ZONIS STREET, CY-3090 LIMASSOL, P.O.BOX 56183, CY-3305 LIMASSOL, CYPRUS. TEL: +357 25555800, FAX:+357 25555801 the international investment, business & finance magazine of cyprus

SPECIAL FEATURE: TRUSTS

Andreas Neocleous & Co LLC Cyprus trust law

yprus’s basic law on trusts, the Trustee Law of 1955, closely resembles the English Trustee Act 1925. Like many laws of the colonial era, it continues in force under the Constitutional provision that preindependence laws should remain in force in the Republic until repealed or amended by its own laws. The English doctrines of equity, the basic foundation of trust law, were formally introduced into the postindependence legal order by section 29 of the Courts of Justice Law (14 of 1960), which requires the courts to follow English common law and equitable principles. However, arguably the most important single development in Cyprus trust law was the enactment of the International Trusts Law, Law 69 of 1992. By providing a framework for the establishment of trusts in Cyprus by non-residents the International Trusts Law represented a giant step forward in establishing Cyprus as an international financial centre.

The Cyprus international trust An international trust must satisfy all the following requirements, set out in section 2 of the International Trusts Law: • the settlor may not be a permanent resident of Cyprus; • no beneficiary (other than a charity) may be a permanent resident of Cyprus; • the trust property may not include any real property situated in Cyprus; • at least one trustee must be resident in Cyprus at all times. Section 5 of the International Trusts Law provides that an international trust may remain in force for up to 100 years. Certain trusts, such as charitable trusts, may continue indefinitely. The income of an international 44

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trust can be accumulated for the entire duration of the trust (section 6). Apart from a prohibition on investing in real estate in Cyprus (which will be removed by a proposed amendment to the law), there is no limitation on trustees’ investment powers, but merely a requirement that they should be exercised in accordance with the trust instrument and with the diligence and prudence expected of a reasonable person when making investments (section 8). In summary, in terms of establishment and maintenance, the Cyprus international trust provides convenience, security, simplicity, flexibility and confidentiality, based on a well-established legal framework. However, its special features are its tax advantages and asset-protection features.

Tax advantages Cyprus international trusts enjoy a number of tax exemptions, providing significant tax planning possibilities, both for high net worth individuals and for corporate structures.

Asset protection The purpose of an asset protection trust is to establish a firewall around the settlor’s assets to protect them from claims that may subsequently arise. Certain countries have forced heirship provisions in their succession law, reserving a specified portion of the deceased’s estate for relatives, and an asset protection trust provides a means of regaining freedom of testation. Section 3(1) of the International Trusts Law explicitly states that a Cyprus court will not enforce the inheritance rules of any country so as to upset the validity of a Cyprus international trust. By their nature, all trusts provide an element of asset protection, by separating the assets held in trust from the settlor’s general assets, which would be available to satisfy his debts or, if the worst came to the worst, pass to his trustee in bankruptcy. However, the Cyprus

international trust has additional advantages. The first is that the International Trusts Law contains a very strong presumption against avoidance of a Cyprus international trust. A Cyprus international trust can be set aside only if it is proved to the court that the trust was made with intent to defraud persons who were creditors of the settlor at the time when the payment or transfer of assets was made to the trust. The burden of proof of the settlor’s intent to defraud lies with the person who is seeking to annul the transfer. The right to take action is lost unless an action is instituted within two years from the date of transfer or disposal of the assets to the trust. These provisions, particularly the requirement to prove intent to defraud, make it very difficult to set aside a transfer to a Cyprus international trust. In practice, the claimant would need very strong evidence indeed to demonstrate that the settlor intended to defraud his creditors. A plaintiff domiciled outside the European Union would be required to provide security for costs under Order 60 of the Civil Procedure Rules. The person challenging the trust must establish that he was a creditor of the settlor at the time the assets were transferred to the trust. The International Trusts Law does not elaborate on the definition of creditor, and it is not clear whether a contingent or prospective creditor would qualify and, if so, what likelihood of the claim crystallising would be required. For British settlors Cyprus has a distinct advantage over many other competing jurisdictions, in that it is not a party to the arrangements established by section 426 of the Insolvency Act 1986, which commit British courts and the courts of certain other jurisdictions to co-operate in insolvency cases. Finally, the Statute of Elizabeth 1571, which invalidates arrangements made to hide assets from future creditors and remains in its original or modified form on the statute books of many offshore trust jurisdictions, is expressly negated in Cyprus. In summary, therefore, within Cyprus the asset protection defences of the International Trusts Law are likely to stand firm as long

as the trust is properly constituted and is established to provide prudent protection against potential claims rather than as an attempt to fraudulently deprive existing creditors of their legitimate rights.

In conclusion Since its introduction at the beginning of the 1990s the Cyprus international trust has proved very popular with settlors from around the world. It has benefited Cyprus by attracting substantial funds and business, not merely for the professional and financial services sector, but also for other sectors, including tourism, accommodation and retail. However, circumstances have changed a great deal since the 1990s. Cyprus has joined the EU and the eurozone, and has completely updated its tax regime. A number of missed opportunities and outdated restrictions in the current law (such as the prohibition on investing in real estate in Cyprus) have become apparent. Meanwhile, competing jurisdictions such as the Channel Islands and Malta have streamlined their trusts legislation, making it more flexible and better suited to current requirements. It is generally agreed that the International Trusts Law urgently needs updating, to align it with EU requirements and to restore Cyprus’s competitiveness as an international trust jurisdiction. A proposed amendment, currently under consideration by Parliament, will make a number of changes to the International Trusts Law. It will remove any doubt about a settlor’s ability to move to Cyprus with his family after establishing a Cyprus international trust and will abolish the prohibition on investment in Cyprus real estate, encouraging investment in Cyprus. It will increase settlors’ freedom by allowing them to retain certain powers while allowing trusts of unlimited duration to be established. By excluding the application of the law of any other jurisdiction it will substantially enhance the “firewalls” and asset protection offered by Cyprus international trusts. Once these amendments are in place, Cyprus will be back in the “premier league” of European trust jurisdictions.

ELIAS NEOCLEOUS

ANDREAS NEOCLEOUS

Andreas Neocleous & Co LLC

HQ address: Neocleous House, 195, Makarios Avenue, Limassol Postal address: P O Box 50613, 3608 Limassol, Cyprus Tel: +357 25110000 Fax: +357 25110001 e-mail: info@neocleous.com Website: www.neocleous.com Chairman: Andreas Neocleous Vice-chairman: Elias Neocleous the international investment, business & finance magazine of cyprus

SPECIAL FEATURE: TRUSTS

Eurofast Taxand

Cyprus International Trust: a valuable instrument in international tax planning “Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then , however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax” ( Lord Tomlin in IRC v. Duke of Westminster [1935] 19 TC 490) Countries of the Civil Law Tradition often find it difficult to understand what a Trust is. A Trust is essentially a relationship, mostly evidenced in writing, whereby one or more persons (the trustees) hold property subject to certain conditions and duties for the benefit of one or more persons (the beneficiaries). Throughout the centuries, the Courts of England and Wales have developed an extensive case law on Trusts. Cyprus, in turn, following the England and Wales law, enacted a dedicated law on Trusts (Cap 193) in 1955. The aforementioned Law is essentially a codification of the extensive English and Welsh case law. Cyprus then went further and, in 1992, it enacted the International Trusts Law 62/1992 (the “Law”), thus adding a new type of Trust to its law, the International Trust. The Cyprus House of Representatives (Parliament) is currently in the process of amending the Law with the objective of making International Trusts even more flexible. The International Trust, as its name implies, is available for non-Cypriot residents wishing to benefit from the 46

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tax advantages conferred under the Law. An International Trust can be used for succession purposes, for real estate investments, to hold the shares of a family business, for charity purposes, simply for confidentiality purposes or for any other form of legal tax planning. As provided under section 2 of the Law, an “international trust” is defined as a trust whereby: (a) The Settlor is not a permanent resident of Cyprus; (b) At all times at least one of the trustees is a permanent resident of Cyprus; (c) The beneficiaries are not permanent residents of Cyprus with the exception of a charitable Institution; (d) The property of the trust does not consist of any immoveable property held in Cyprus. The International Trust comes into creation by the simple process of creating a trust instrument, which looks in essence like a contract with special characteristics. The Law further provides clearly for the tax advantages of the International Trust under section 12. It is provided that except a stamp duty of approximately €450, there shall be an exemption from taxation on the income and the gains of an International Trust on the precondition that these are derived from non- Cypriot sources. This means that no taxation on profits derived from the Trust and no taxation on the dividends, interest or royalties received by the Trust. In addition, any possible sale of assets of the Trust shall not be subjected to any capital gains tax in Cyprus. The International Trust is also

beneficial for succession situations since no estate duty is payable in Cyprus. The benefits of a Cyprus International Trust do not end here. The trust can also be used for confidentiality purposes, holding family property on behalf of a minor or even to protect family properties from a profligate son in law! The Cyprus International Trust can be very beneficial indeed, if proper advice by experienced professionals is received. The principle laid down by Lord Tomlin in the “Duke of Westminster case” is well applicable today provided that a proper observance of the law is followed.

Michalis Zambartas

Eurofast Taxand, Cyprus

Address: Cypress Centre, 5, Chytron Street, P.O. Box 24707, Nicosia, Cyprus Tel: +357 22699222 Fax: +357 22699004 e-mail: info@eurofast.eu Website: www.eurofast.eu

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Eurofast Taxand announced “Cyprus Tax Firm of the Year 2011" at the European Tax Awards organised by International Tax Review (ITR)

Eurofast Global Offices:

The European Tax Awards rewards firms in Europe for exceptional tax advice, capabilities and innovation in the area of international tax planning. ITR established itself as the most authorative and trusted publication for tax directors, policy makers and practitioners worldwide. Each publication includes international news and analysis in depth features, surveys and international uptates making it an invaluable tool for tax professionals and businessmen. Eurofast Taxand provides comprehensive tax advice services in Cyprus and via its close cooperation with Eurofast Global delivers a range of financial services in South Eastern Europe and East Mediterranean. Eurofast Taxand is the Cypriot memner firm of Taxand. www.taxand.com Eurofast is the Cyprus member of Taxand

2011

2010

Cyprus Tax Firm of the Year

Ranked Tier One Tax Transactional Practice in Cyprus

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Cypress Centre, 5 Chytron Str. P.O.Box 24707, 1302 Lefkosia, Cyprus T: +357 22 69 92 22, F: +357 22 69 90 04, info@eurofast.eu,www.eurofast.eu

SPECIAL FEATURE: TRUSTS

George Z. Georgiou & Associates

What is a trust?

trust is established by an individual, known as the Settlor and is a means whereby property is held by one or more individuals, known as the Trustees, for the benefit of another or others who are called the Beneficiaries. The terms and powers of the trustees are set out in the Trust Deed. The Trust Property is legally held and registered as owned by the trustee who is legally obligated to hold it and the income arising therefrom for the benefit of the beneficiaries who constitute the beneficial owners.

Benefits of a trust Trusts are traditionally viewed as an ingenious way whereby the weakness of the contract concept in common law is overcome. This is due to the fact that a beneficiary need not be a party to the transaction nor does he need to provide consideration for the settlor’s ‘promise’. In fact, beneficiaries may not even exist at the time of the creation of the trust. Furthermore, trusts are considered highly effective tax-saving devices and an ideal instrument for preserving the family’s wealth since they can ensure that the beneficiary is well provided for, without the risk of him depleting the family assets 48

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due to mismanagement or unsuitable marriage or mental handicap. Finally, trusts are equally apt in providing for charities, promoting a religious or artistic cause, or establishing a foundation to support a worthy project.

parties are unaware of the existence of the trust since all the relevant documentation is in the name of the trustee. It is worth noting that charitable and purpose trusts may remain in force indefinitely, whereas all other trusts can exist for up to 100 years.

Types of trusts

Cyprus Trusts

Trusts are classified into types with the most commonly used one labeled the discretionary trust. Under such a trust, the trustees enjoy discretion in dealing with the trust property according to what they consider to be for the benefit of the beneficiaries. In contrast, the fixed trust does not give the trustees any discretion when distributing the trust assets to the beneficiaries. As an alternative, it is possible to create a so-called hybrid trust combining elements of both discretionary and fixed trusts. Another option available is the protective trust whereby the life interest given to the beneficiary is realised upon the happening of certain defined events such as when the beneficiary becomes bankrupt. It is also possible to set up a charitable trust as long as the trust has as its main purpose at least two goals out of the four qualifying ones, namely: the relief of poverty; the advancement of education; the advancement of religion; and other purposes beneficial to the public in general. Finally, the trading trust has trading functions and employees to run the business with the trustee being a limited company with the power to carry on business. With this type of trust, third

In Cyprus, local trusts are governed by English common law and the original Trustee Law. The settlor and/or any of the beneficiaries are residents of Cyprus, and the trust and its property are subject to exchange controls. On the other hand, Cyprus International Trusts are governed by the International Trusts Law, 69/92 which regulates the creation and administration of International Trusts. International Trusts are the most commonly used Cyprus Trusts by foreign settlors. In order for an international trust to be qualified as such, the trust property must be situated outside Cyprus, the settlor and the beneficiaries must not be permanent residents of Cyprus whereas at least one of the trustees must be (individual or corporate).* However, in contrast to other international jurisdictions, where the settlor or the beneficiary is a Cyprusresident company or an alien beneficiary who has retired in Cyprus then the trust can still qualify as a Cyprus International Trust so long as the property settled and the income earned is abroad. Furthermore, the trust property cannot include any immovable property in Cyprus.

Advantages of the Cyprus International Trusts The Cyprus International Trust can be appealing to individuals for numerous reasons, one of which is tax advantages. According to section 12 of the International Trusts Law, “the income and gains of an international trust derived or deemed to be derived from sources outside the Republic shall be exempt from all taxes imposed in the Republic and no estate duty shall be chargeable in respect of assets belonging to an international trust.” The relatively low tax rate of 10 per cent is levied on the trustee management fee where the trustee is a Cyprus-resident company. However, the tax is avoided where the company carries on business on behalf of a Cyprus International Trust. A further incentive to set up a Cyprus International Trust may be the island’s wide network of double-tax treaties which provide favourable tax benefits to individuals classified as tax residents of the contracting states. Tax residents

are defined in Article 4 of the Model Treaty of the Organisation for Economic Cooperation and Development (OECD) as persons liable to tax. To this extent, trusts cannot qualify as tax residents but this is circumvented by the fact that trustees do and may certainly claim the benefits in question since they are both persons and liable to tax as we have seen above. As such, the favourable tax benefits arising from double tax treaties may be available regarding any income and gains deriving from the trust. The Cyprus International Trust may also be used for asset protection. International Trusts Law section 3 states that no foreign law on inheritance or succession shall invalidate the trust or affect any transfers or dispositions to the trust, thus rendering the Cyprus international trust to a great extent exempt from forced heirship and claw back rules. The section also provides that the trust shall not be set aside by the settlor’s creditors unless there was intent to defraud the settlor’s creditors when the disposition or transfer of assets was made to the trust.

Another advantageous aspect of the International Trusts Law is the option to remove the International Trust from Cyprus and vice versa where the trust deed expressly allows for such a change of jurisdiction. However, in order to implement a move from Cyprus, domestic law requires that the new jurisdiction recognises the trust’s validity and the respective rights of the beneficiaries. In the case of a move to Cyprus, the move must be recognised by the other side’s jurisdiction. Finally, no registration or reporting is required for trusts established in Cyprus. The only authority to be notified of the creation of an International Trust is the Central Bank of Cyprus and only when the International Trust owns shares in a Cyprus Company. The absence of a requirement for registration is particularly appealing where confidentiality is of the essence. *A permanent resident is one who resides in Cyprus for a period in excess of 183 days. the international investment, business & finance magazine of cyprus

SPECIAL FEATURE: TRUSTS

Michael Kyprianou & Co. LLC By Lambros Soteriou and Khamis Abulhawa

yprus has inherited its trust law from the principles of equity and case law as it is applied in the United Kingdom. In 1955 the Cyprus Trustees Law Cap.193 was enacted, that emulates from the English Trustees Act of 1925. In 1992 the Cypriot Parliament saw the need for more attractive and modern legislation to place Cyprus on the map of desirable trust jurisdictions worldwide. Thus, the International Trusts Law No. 69/1992 (hereinafter referred to as the “Law”) was enacted that provides for the formation and administration of international trusts, offering considerable incentives for the establishment of such trusts in Cyprus. This law is not a self-contained law on trusts but it builds on the existing trust legislation, The Trustees Law, Cap.193. The provisions of the Cyprus Trustees Law remain in force except in so far as they are inconsistent with or have been modified by the provisions of the Law. The aim of this article is to discuss the nature of trusts in general, the establishment of International Trusts, the imposed taxation and the advantages of creating such trusts. Greater emphasis is given to the Law of International Trusts as this Law has introduced certain novel provisions, which will be discussed, designed to make Cyprus a more attractive centre for international trusts.

Nature of Trusts A Trust is based on the entrustment of the legal ownership of property of one 50

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person “the Settlor” to another person or entity “the Trustee” for the benefit of a third person “the Beneficiary”. In other words, the legal ownership of the property passes from the Settlor to the Trustee who only holds it for the benefit of the Beneficiary with whom equitable ownership rests. An executed arrangement between the Settlor and the Trustee, that is known as the instrument creating the trust, confers extensive enforceable rights on the Beneficiary. The trust must satisfy the classic requirements of the three certainties, namely, certainty of intention, subject-matter and objects. In simple terms, by the instrument purporting to create the trust, the Settlor must manifest an intention to create a trust, the trust fund must be specified with reasonable certainty and the Beneficiaries under the trust must be ascertainable. The foundation of a trust consists of the relationship between the Trustee and the Beneficiary.

International Trusts Interpretation

The Law defines an International Trust as a trust in respect of which, a. the Settlor is not a permanent resident in the Republic; b. at least one of the Trustees for the time being is, during the whole duration of the trust, a permanent resident in the Republic; c. no Beneficiary, other than a charitable institution, is a permanent resident of the

Republic; and d. the trust property does not include any immovable property situated in the Republic.

Provisions of an International Trust Capacity to create an International Trust In relation to the capacity of a Settlor creating an International Trust, the Law hereby states that a Settlor who transfers or who in whatever manner disposes of assets to an international trust shall be deemed to have the capacity to do so, if at any time of such transfer such person is of full age and of sound mind, under the laws of the country of which the Settlor is a permanent resident.

Duration of an International Trust The duration of an International Trust may continue until the one hundredth anniversary of the date on which it came into existence and will then terminate, unless terminated sooner pursuant to a relevant direction which is indicated in the instrument creating it or for any other reason.

Registration International Trusts are exempted from the requirement of registration under the provisions of any law. Consequently, there is no need to register an International Trust with any governmental authority. The instrument creating the International Trust shall be liable to a

The Law hereby states that the income and gains of an International Trust derived or deemed to be derived from sources outside the Republic shall be exempt from all taxes imposed in the Republic. In addition, no estate duty shall be chargeable in respect of assets belonging to an international trust. Therefore, International Trusts are exempt from income tax, capital gains tax and estate duty tax, making International Trusts a very attractive tax planning vehicle for non-resident investors.

provided that: a. the new applicable law would recognise the validity of the trust and the respective interests of the beneficiaries; b. in case of a change from another Law to the law of the Republic such change is recognized by the applicable law of the Trust previously in effect. c. There are no reporting requirements of any nature. The Law hereby states that, where the Court has not issued an order for disclosure, the trustee or any other person, including government officials and officers of the Central Bank of Cyprus, shall not disclose any information or documents pertaining to the identity of the Settlor, the Beneficiaries, the Trustees and their duties, or the accounts or assets of the trust.

Advantages

Conclusion

stamp duty of â&#x201A;Ź427.15, or such other fixed amount as may from time to time be prescribed by the Council of Ministers, payable to the Stamp Duty Commissioner.

Taxation

International Trusts provide further advantages other than taxation, discussed above. The additional advantages are: 1. The law relating to inheritance or succession in force in the Republic or in any other country shall not affect in any way the transfer or disposition of any assets or the validity of the International Trust. 2. An International Trust shall not be void or voidable in the event of the Settlorâ&#x20AC;&#x2122;s bankruptcy or liquidation of his property or in any action or proceedings against the Settlor at the suit of his creditors, unless it is proven to the satisfaction of the Court that the International Trust was made with the intent to defraud the creditors. The onus of proof of such intent on the part of the Settlor lies with such creditors. 1. A Trustee may at any time invest the whole or any part of the trust funds in any kind of investment as long as the Trustee exercises the diligence and the prudence which a reasonable person would be expected to exercise when making investments. 4. If the terms of an International Trust so provide, the applicable law may be changed to or from the law of the Republic,

Facing a world of increased transparency, the use of a trust has become a popular vehicle of international tax planning and transfer of wealth. Further to the enactment of the International Trust Law, one could argue that Cyprus is now well placed on the Trust map. The highly respected judiciary, the efficiency of the legal system in Cyprus, the clarity of the relevant legislation along with the incentives for creating an International Trust, hereby make the Cypriot International Trust a significant taxplanning tool. The Cypriot International Trust has no disadvantages, if compared with other jurisdictions where trusts are also created. On the contrary, Cyprus, a member of the European Union since 2004, is a reputable jurisdiction worth considering when it comes to international tax planning and asset protection. Amendments to the Law are currently under constant discussion between governmental authorities, whereby an amended International Trust Law will, in the near future, come into force. The amendments aim to further the advantages of the Law and consequently, the advantages of creating an international trust in the Republic.

Lambros Soteriou

Khamis Abulhawa

Michael Kyprianou & Co. LLC

Address: 2, Agias Elenis Street, 6th & 7th floor, Stassinos Building, 1060, Nicosia, Cyprus Tel: +357 22.44.77.77 Fax: +357 22.76.78.80 e-mail: khamis@kyprianou.com.cy lambros@kyprianou.com.cy Website: www.kyprianou.com.cy the international investment, business & finance magazine of cyprus

SPECIAL FEATURE: TRUSTS

Oxford Management Ltd. By Athos Fouttis

The Concept of Trust in Simple Terms

he various types of trust vary in complexity but they have one common fundamental feature. A “person” being either an individual or a company (“the trustee”) agrees to hold certain assets (“the trust fund”) in its name for the benefit of another person (“the beneficiary”) on certain terms and with certain powers (which are usually set out in the trust Deed). The assets comprising the trust fund are legally held and registered as owned by the trustee and the trustee is under a duty, enforceable in the Courts, to hold those assets and the income arising from them for the benefit of the beneficiary(ies).

Type of Trust Today the trust concept is frequently used in a wide range of international financial and legal issues. Trusts may vary in form to satisfy the needs and objectives of the settler, thus although similar in the basic concept (i.e. the trustee holding assets for the benefit of the beneficiary/ ies), trusts,could vary in the way they are structured and operated. The following are some of the types of most commonly used trusts: • Protective trusts • Discretionary Trusts • Fixed Trusts • Trading Trusts

The Three Certainties For the validity of trusts there must be the 52

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existence of three certainties. The three certainties provide the set of conditions which must be present for the trust to exist: • Certainty of Intention • Certainty of Subject Matter • Certainty of Object

The Cyprus International Trust The term “International Trust” refers to the trusts which are set up under the provision of the International Trusts Law of 1992. An International Trust is a trust whereby: • The settlor is not a permanent resident of Cyprus • The beneficiary is not a permanent resident in Cyprus (except charitable institutions) • The trust property does not include immovable property in Cyprus • At least one trustee is resident in Cyprus (A Cyprus company or partnership is considered as a resident trustee.)

The Legal Framework The legal framework to be found in the Cyprus trust legislation is summarized as follows:

Asset Protection An International Trust shall not be void or voidable in the event of the settlor’s bankruptcy or liquidation or in any action or proceedings against the settlor or at the suit of his creditors notwithstanding any provision of the law of Cyprus or of any other country. An International Trust may be set aside by the settlor’s creditors to the extent that it is proven to the satisfaction of the Cyprus Court that the International Trust was made by the settlor with the intent to defraud the

creditors. The onus of proof of this intent shall be on the creditors.

Choice of Proper Law The Trust instrument creating the trust expressly states the law under which the trust is established and the jurisdiction in which it will be administered. The proper law will influence various aspects of the trust. These are, amongst other things the validity, rights and obligations of the trustee, settlor and beneficiaries. Therefore, the trust instrument must state clearly the proper law when creating the trust. The proper law chosen and specified in the trust instrument will govern the trust. The form for the administration of the settlement will be determined by the express provisions in the deed or failing such provisions by the general rule that the forum will be the place where the trustees reside.

Changing the Proper Law An International Trust may adopt a foreign law, provided that the new law recognizes the trust and the rights of the beneficiaries. Likewise, a trust created in another country may change to the law of Cyprus, provided that the foreign law recognizes this change.

Foreign Laws – Conflicts The Cyprus International Trusts Law provides that no foreign law relating to inheritance or succession will invalidate the transfer or disposition relating to the creation of such trust.

Settling of a Trust A trust is established by an individual – “the settlor” – and is a means whereby property is held by one or more persons – “the trustees” – for the benefit of another or others – “the beneficiaries” – or for specific purposes. The

settlor can be a trustee and the settllor and the trustees can also be beneficiaries. A trust may be created by the owner of property during his/her lifetime by Deed or upon his/ her death by will.

Trust Property The trust property can include all kinds of assets situated anywhere in the world provided the trustees have legal control and ownership of the assets according to the law governing the particular trust.

Liabilities of Beneficiaries The beneficiaries of a discretionary trust will generally not be taxed until such time as the trustee has exercised his discretion. In the case of a strict trust the beneficiaries are taxed on their interest and the trust property is subject to estate duty.

Failure of Interest

of being subjected to the trust. • A declaration of, or disposition on, trust by a person competent to create a trust or an obligation for valuable consideration to make the disposition. • Certainty of property or objects. • Legality and compliance with statutory requirements regarding evidence.

If the terms of the trust are contingent that the rights of the beneficiary will depend on the happening of one event, and that event does not occur, then the beneficiary’s interest under the trust will cease. A protective trust may be created under which a beneficiary may be given a life interest which may become discretionary on certain defined events such as the bankruptcy of the beneficiary.

Invalid – Unenforceable Trusts

Trustees

Letters of wishes

Appointment The beneficiaries may be defined by name or by reference to a class (i.e. the settlor’s children or grandchildren). The beneficiaries must be appointed at the time when the trust is formed. It is possible for additional beneficiaries to be appointed afterwards.

The trust instrument defines the trustees as “the trustees herein specified or the trustee or trustees for the time being hereof”. Qualifications – Number In general, any individual or corporation may be appointed as trustee. A minor can not be expressly appointed a trustee of real or personal properly. A corporation may be a trustee provided it falls within the definition of a “trust corporation”. Subject to the above, any person may be a trustee, though certain categories of persons may be regarded as unsuitable so that the court may remove them, e.g. bankrupts or those convicted for crimes involving dishonesty.

Change to the current law

Removal

The Trust Deed

The beneficiaries may be removed any time after the creation of the trust in accordance with the provisions of the trust deed.

There are two ways in which a trust may be created, namely by will or “inter vivos” by way of a written trust deed. The essentials for the creation of these two types of trust are identical and are based on certain prerequisites which are fundamental to the nature of the trust concept.

Duration of a Trust The perpetuity periods of Cyprus trusts are not governed by the English statutory provisions of 1964 as they were enacted after Cyprus independence. The position, therefore, is that the old English equity principles are followed so that no trusts, with the exception of charitable trusts, may continue in perpetuity. Trusts endure for either the period of life plus 21 years or, where there is no life in being, merely for 21 years. An International Trust may last up to 100 years. This period does not apply to charitable and purpose trusts.

Beneficiaries

Rights of the Beneficiaries The trust instrument sets out the rights of the beneficiaries and the trustees have to observe these rights otherwise they can be sued by the beneficiaries. The rights of the beneficiaries vary in accordance with the type of trust, i.e. whether the trust is discretionary or strict, as described above.

The essential elements to constitute a valid trust are: • The property or rights which are capable

The courts in Cyprus will not enforce a trust which is illegal or contrary to public policy.

Amending a Trust The Trustee Law does not prohibit the amendment of the trust deed. The trust deed should contain powers to permit the trust instrument to be amended. It is possible for the settlor of a discretionary trust by the use of a letter of wishes to set out to the trustees his/her requirements concerning the investment of trust property and the distribution of income and assets to the beneficiaries, both during his/her lifetime and after his/her death. Provided that the letter of wishes is not in contravention of the trust deed or the law, the trustees will accede to the wishes of the settlor without question. However, a letter of wishes is not legally, but only morally, binding on the trustees.

Recently there has been a move to make certain changes to the current law relating to the “international trusts”. No changes are approved at the time of writing this report.

Oxford Management Ltd.

Athos Fouttis, Managing Director, Oxford Management Ltd. Address: Agias Fylaxeos & Zinonos Rossidi 2, 3082 Limassol, Cyprus Tel: +357 25 82 33 30 e-mail: solutions@oxfordcy.com Website: www.oxfordcy.com the international investment, business & finance magazine of cyprus

SPECIAL FEATURE: TRUSTS

Costas Tsielepis & Co. Ltd

yprus has witnessed a staggering rise in the number of wealthy individuals setting up Cyprus trusts. This statement cannot be verified empirically, given that unlike a Foundation, a trust is not registered with a Registrar. Based on the experience of my firm, and from discussing the subject with external associates and colleagues, however, I am confident in the accuracy of this statement. Settlors in Cyprus are often from countries where equity law does not feature in their legal framework, notably civil law jurisdictions, and as a result have an imperfect understanding of what a trust is. A prospective settlor may ask to see the law governing Cyprus

ostas Tsielepis & Co Limited (“CT&Co”), a firm of Chartered Accountants, is based in Limassol, Cyprus. Over the years it has derived a reputation as a boutique business consulting firm. CT&Co has carved out a niche market and caters mainly for the personal businesses of high net worth individuals. The firm’s founder, Mr Costas Tsielepis, trained as a Chartered Accountant in London, receiving

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International Trusts to understand it. Yet the law in itself offers very little guidance over the notion of the trust concept. Equity law restrains and restricts the exercise of legal rights and powers when it would be unconscionable for them to be exercised in full. This is a fundamental building block of what the trust is about. Comprehension of the law provides no such insights. The Cyprus Trust gaining increasing popularity is really more a case of relationships. A trustee will take legal ownership of the trust fund. The trustee is said to be the owner in law and the beneficiary the owner in equity. The trustees’ legal rights over the trust fund are subject to the beneficiaries’ rights in it. As such, the settlor needs to feel comfortable that his wealth, the product

of a lifetime of difficult decisions and actions, is in safe hands. And in most cases high calibre Cyprus professionals have been looking after the interests of these settlors for many years already. It is true that Cyprus trust law requires an ‘upgrade’. To a large extent, the recent draft legislation which serves to amend the existing law on Cyprus International Trusts is a big step forward. Yet even without such amendments I would argue that the Cyprus Trust would still do well. I would also argue that our biggest threat is not the competition from other jurisdictions, but the incompetence of the existing Government to deal decisively with the economic issues it faces. Negative economic outlooks can erode important foundations on which entire business relationships have been built.

ICAEW membership in 1968. He has over 40 years of experience in advising on structuring and developing client’s businesses, some of whom are the largest in their respective markets. His broad experience includes an appointment for a period of 20 years as one of the four nonexecutive Directors of the Central Bank of Cyprus who, together with the Governor of the Central Bank, formulated the country’s monetary policy. The practice employees around 40 persons, all high calibre staff, many of whom were selectively headhunted.

“It is imperative that we meet the demands of our clients. We work closely with them to develop their business strategies and we offer solutions to even the most complicated business issues. This is due to the strength of our experience and the quality of our associates” George Tsielepis, Member of the Board of Directors and Head of Audit “Our extensive network of associates and our in-house expertise are both key to achieving this aim. The relationship with our clients is based on trust, mutual

respect, professionalism and strict confidence. Our ability to cater for all needs means that our clients can draw on the expertise and support that we provide thus enabling them to focus more freely on their core business strategies and development.” Antonis Christodoulides, Senior Manager, Audit

Audit & assurance The firm has developed its own audit program, tailoring this for every client case, in an effort to offer meaningful recommendations for any issues arising. The audit profession has undergone marked changes over the past few years in order to be able to provide investors with clear and transparent financial reporting in an increasingly complex regulatory and technical environment. Within this framework, CT&Co has succeeded by striving continuously to respond to the demands of the profession and to the best practice guidelines of the Professional Institutes of which we are members. CT&Co provides audit and assurance services for a full range of organisations including: • Publicly listed entities • Privately held entities • International Business Companies • Joint ventures • Sole traders and partnerships • Not-for-profit organisations The audit approach is designed to identify the business and financial risks associated with clients and the industries in which they operate and to respond to those risks by designing and performing appropriate and sufficient audit tests. The firm ensures

that its audit approach complies with professional best practice and adheres to the International Standards of Auditing and International Financial Reporting Standards. CT&Co is committed to ongoing communication with its clients in order to enable them to understand both the implications of the work the firm performs and its recommendations for improvements to their internal control systems and financial reporting process.

Taxation Taxation is a fundamental part of corporate life and our clients can be sure that we are there with them every step of the way. Given the rising complexity of tax legislation as well as the increasing number of bilateral tax agreements between Cyprus and other countries, tax governance plays an important role from a corporate viewpoint. Cyprus has one of the lowest effective tax rates in the European Union and one of the most competitive overall tax regimes in the world. As such, it has become a strategic country for inclusion in tax planning on a corporate level as well as on a personal level. “Our dedicated tax department works together with our clients to advise them on tax matters, allowing them to focus more freely on their business. The department has in-depth technical knowledge of both direct and indirect taxes and wide experience in granting advice and resolving taxation matters, including advice on corporate structures, tax planning as well as the setting up and administration of trusts. We invest heavily in understanding our clients’ business, thus developing tax strategies that work for them.” Costas Constantinou, Senior Manager, Taxation

Trusts CT&Co pays great attention to creating and managing trust structures. The affiliated firm, Chelco Trustees Limited, already acts as Trustee or Protector to a number of trusts and has trust assets worth billions of dollars. “Once set up, the trust should be around to service generations. Ensuring that our clients fully understand what they are embarking on when setting up a trust may take weeks or even months. We purposely challenge them to consider all aspects of setting up the trust, of the provisions of the trust deed and generally planning the structure. Understanding the purpose of the trust, recommending appropriate structures based on the tax jurisdiction of the beneficiaries and of the trust fund. There is a high sense of responsibility and commitment in carrying out our work as Trustees. Our clients have entrusted us with their life’s output. It is our duty to ensure that we exercise our responsibilities under the trust deed in the most professional and diligent manner.” Alexis Tsielepis, Member of the Board of Directors and Head of Taxation The firm prides itself in offering a personal, transparent, confidential and professional service drawing from over forty years of experience and knowledge.

Costas Tsielepis & Co. Ltd

Address: 1st Floor| Louloupis Court 205, 28th October Avenue, 3035 Limassol, Cyprus Tel: + 357 25 871 000 Fax: +35725373737 e-mail: info@tsielepis.com.cy Website: www.tsielepis.com.cy the international investment, business & finance magazine of cyprus

SPECIAL FEATURE: TRUSTS

Cyproman CEO and Managing Director: Costas Christoforou

Top Management: Costas Christoforou – General Manager Andreas Loizou – Senior Manager Accounting, Trust and Fund Administration Arlene Nahikian - Senior Manager Banking Administration Elena Chrysanthou - Senior Manager Legal Administration Dina Mousikou – Manager Larnaca office

Company history Cyproman Services Limited was incorporated in 1996 and commenced operations the same year. Initially it concentrated on providing trustee services. Gradually, though, it has expanded to offer a wider range of services, accommodating the business needs of today’s entrepreneurs. Cyproman has fully-fledged offices in Nicosia and Larnaca, and offers similar services in Limassol through its subsidiary firm C.P. Palema Ltd. Over the last few years, both Cyproman & Palema have become two of the largest providers of Fiduciary and Administration services in Cyprus, offering their services to a well-diversified clientele.

Services include Fiduciary

Advising and assisting in the formation of an appropriate business entity in the most advantageous jurisdictions including: Limited companies, International Trusts, International collective investment schemes, International banking units, International financial services companies, International 56

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trustee services companies, Shipping companies, Providing nominee shareholders, Providing local directors to meet the requirements of management and control from Cyprus • Acting as trustees of international trusts • Acting as escrow agents • Providing a company secretary • Providing a registered office address together with any required facilities

Administration • Opening and operating bank accounts with any of the local and international banks • Arranging for the issue of invoices, credit notes, purchase orders and other documents • Arranging for the legalisation and certification of documents • Preparing resolutions for opening bank accounts and other bank matters • Providing translation services for most of the European languages • Providing mail facilities (receipt, sorting, forwarding) and handling correspondence with third parties • Providing Internet Banking facilities • Arranging and providing facilities for meetings with bank officers, advocates and other professionals • Assisting clients on private banking information through Banks and Financial Houses • Assisting in the application for obtaining work and residence permits for principles and expatriate personnel

Fund Administration • Keeping the register of shareholders in electronic form • Arranging for the issue, transfer, allotment, conversion, redemption and/or purchasing of shares in accordance with the Articles and under the supervision, and in accordance with

the instructions of the company and updating the register accordingly • Receiving, recording and dealing with letters of administration, power of attorney, dividend mandates, vesting orders, notices of change of names and other documents affecting the title to shares or any dividends payable and consequently updating the register • Following the custodian's orders to pay or deposit all monies and securities received • With the instructions of the board of directors preparing and issuing cheques for dividend payments or payments of redemption monies and notifying shareholders of all such payments • Dispatching all such circulars, notices of meetings, reports and financial statements to all persons who are entitled to receive them • Attending board meetings and general meetings of the company when so required • Acting as a proxy agent in connection with the holding of meetings of shareholders, receive and tabulate votes cast by proxy and communicate to the company the results of the tabulation • Determining in the name and on behalf of the company on each valuation day the Net Asset Value per share in accordance with the information supplied by the Investment Manager • Keeping the accounts of the company and such financial books and records as are required by law or otherwise for the proper conduct of the financial affairs of the company

Cyproman Services Limited

Address: 12 Esperidon street, 4th floor, 1087 Nicosia, Cyprus Tel: +357 22474000 Fax: +357 22474808 e-mail: info@cyproman.com.cy Website: www.cyproman.com.cy

Your door to an independent, professional services provider Offered Services:

SAS 70 Type I Certification Cyproman Services Limited is a well established professional firm offering trustee, fiduciary, company secretarial, administration, accounting, payroll and fund administration services to a multinational and diverse clientele. Cyproman announces that it has achieved an SAS 70 Type I Certification, following adherence to the rigorous requirements of the standard. The independent examination reviewed Cyproman's specified controls as at 31 March 2011 in relation to the services provided. Cyproman will be pursuing a Type II Certification later this year.

The SAS 70 examination is an internationally recognized auditing standard developed by the American Institute of Certified Public Accountants. It provides authoritative guidance, which allows service organizations to disclose their control activities and processes to their customers and their customersâ&#x20AC;&#x2122; external auditors in a uniform reporting format. The review was performed by KPMG Limited. This demonstrates the ongoing commitment of Cyproman in delivering quality services, reliable operations and transactions, while maintaining high integrity and an effective internal control environment.

Trustee Fiduciary Company Secretarial Administration Accounting Payroll Fund Administration

Please contact us at:

Cyproman Services Limited Main Office:

12 Esperidon Street 4th Floor CY-1087 Nicosia - Cyprus P.O. Box 22096 CY-1517 Nicosia - Cyprus Tel: +357 22474000 Fax: +357 22474808 Larnaca Office:

4 Makariou & Kalogreon Corner, Nicolaides Sea View City 9th Floor, Offices 903-904, Block A-B CY-6016 Larnaca - Cyprus P.O. BOX 40569 CY-6305 Larnaca - Cyprus Tel: +357 24823420 Fax: +357 24823421

info@cyproman.com.cy www.cyproman.com.cy

divorce

Premeditated International Divorce Planning Forewarned is forarmed when it comes to ending a marriage

By Andreas Constantinides

iven that divorce is on the increase, in the Western world at least, the financial consequences of being divorced in one legal jurisdiction rather than another can be highly significant. Getting divorced in London rather in Nicosia – or any other jurisdiction for that matter – may have vastly different consequences for the parties involved. The disparity between the practices of divorce courts in Tokyo compared to those in Sydney, for example, and of the divorce courts in Hong Kong as compared to those in Frankfurt, are equally vast – or possibly even more so. England has acquired a reputation as the divorce capital of the world for anyone whose spouse is well-endowed with assets so such people should ask themselves some vital questions before divorce proceedings begin because once started, it may be too late to save much of what could be retained in a different jurisdiction. The party who was, to all intents and purposes, very well off (in terms of both movable and immovable assets) before may be far less so after the maintenance (alimony) for the former spouse and children, the dividing up of assets, legal costs, etc. have been settled. If truth be told, hardly anybody takes the time to research the benefits of one jurisdiction compared to another prior to the commencement of divorce proceedings, when in reality it can make an immense difference. Many applicants for

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divorce simply assume, for instance, that where they live is the jurisdiction in which they must start the divorce process. In fact this misjudgement could be the most costly oversight of their lives. The differences between one divorce jurisdiction and another are vast. Strategy is everything prior to the commencement of divorce proceedings and, as such, a brief consultation with an international divorce planner could be the biggest money-saving decision of a soon-to-be divorcé(e)'s life. Strategy is everything. Should you commence the proceedings or respond to them? Should you attempt to patch up a broken relationship even temporarily (either for the sake of your offspring and/ or for the sake of your assets)?

Strategy is everything prior to the commencement of divorce proceedings The best advice one can give is “always be prepared”. Everybody is aware that when two people marry they are (almost always) in love and divorce is the last thing on their minds. However, a premeditated strategy for the eventuality of divorce is always the best course of action. “Better to be safe than sorry” has always been our firm’s policy.

Key Issues for an International Divorce Lawyer

 The Economic Standing of the client

The first thing a lawyer should do is evaluate all the client’s assets. Are there any assets abroad? Are they movable or immovable? Are the assets in a different jurisdiction from that where the divorce proceedings take place? Will the court order be legally binding? Some jurisdictions allow and even encourage the courts to divide even a party’s premarital assets (England). Others do not (New York).

 What are the aims, goals and desired outcomes of the client?

A lawyer must take this into consideration. Not doing so could have a huge impact on the rest of the client’s life. Example; a bad lawyer could damage the relationship of the client and his offspring and/or other family members. Is the client willing to go through the trouble of moving abroad in order to commence proceedings? Some jurisdictions require that the client live there for a period of time before having locus standi’ (the right to appear before a court).

 Which jurisdictions are

beneficial, based on information provided by the client?

Based on the initial meeting(s) between lawyer and client and on the latter’s

responses, the international divorce lawyer should provide advice on the advantages and disadvantages of several jurisdictions. Are there ties to any jurisdictions? If so, what are the benefits of these? Are there any jurisdictions to which there are no ties but where, based on the client’s responses, it would be extremely beneficial to commence proceedings, if allowed to do so by that jurisdiction’s legislation?

 Further advice from the desired jurisdictions:

Because no lawyer can be an expert in every jurisdiction, it is always best to seek advice from counsel in that jurisdiction. This gives a competitive advantage over the other side. Furthermore, sound advice can be the difference between winning and losing when it comes to litigation.

n international divorce lawyer must ask counsel for a detailed analysis of the law in their jurisdiction, including answers to these key questions: • Who can get divorced in that jurisdiction? What must the client do in order to be able to commence proceedings there? For example, if a British citizen wishes to divorce in Cyprus, does he/she have to: (a) move to Cyprus for a period of 3 months? (b) make an application to the Family Court of the district he/she is living in? • Is there a difference between the proceedings conducted for religious marriages and those for civil marriages? • The grounds for divorce vary between jurisdictions. What must the client prove so as to be successful in his/her application? What evidence has to be provided to the Court? • Are the proceedings especially lengthy in the jurisdiction? Some jurisdictions grant divorces much quicker than others! • Do the divorce proceedings require a single application to the Court or several? Some jurisdictions require the separation of assets with the divorce application; others require

many applications for the various remedies sought, e.g. divorce, alimony (maintenance), property differences, division of movable property, etc. • Do prenuptial agreements apply? Most British Commonwealth countries do not recognise them and they are therefore invalid.

A premeditated strategy for the eventuality of divorce is always the best course of action • What is the method of asset division? Is it pre-marital “ownership” or “Contribution”? Does it make a difference if the property is movable or immovable? For example, in Cyprus the applicant must prove that there has been an increase in the property from when the parties met with the intention of marriage (e.g. engagement, though it could be before). “Contribution” is the key word when it comes to separating the assets (immovable as there is generally an ownership based division with regards to movables) of a marriage. There is a rebuttable presumption in the Law that the contribution of each spouse in the increase of the property of the other is equal to one-third unless proven otherwise. The contribution may be direct (“I had a job and paid half the mortgage/loan every month”) or indirect (“I was at home cooking, cleaning and looking after the children so you could be free to go out and work.”) • Alimony/Maintenance of the children and/ or former spouse. At what age does this stop for the offspring? In most jurisdictions it is when the minor becomes an adult (usually 18), however there are some jurisdictions that allow for maintenance if the children continue with higher education. Is previous lifestyle taken in to account? Can an initial

Court order be amended if the financial situation of the parties involved alters? • Applications for recognition of fatherhood; Are you really the father? If so you will most likely have to pay maintenance. If not, you may be discharged from your duty to do so. DNA tests have helped the Court in this area a great deal but not all jurisdictions allow for this. • Access to and custody of the children: Does the Court take in to account the wishes of the children? Does the court decide what is best for the children on its own? • Are the Court Orders enforceable in other jurisdictions? In which other jurisdictions are the orders of the court enforceable, if any?

Costs of Litigation The above list is not exhaustive but these are factors that will help an international divorce lawyer make a more informed decision about the best interests of the client.



Selecting the jurisdiction that most meets the needs of the Client: Once the aforementioned advice has been gathered from the desired jurisdictions, the next step is to provide all the necessary information to the client and advise him/her on the benefits and pitfalls of divorce in the various jurisdictions. The client takes the final decision based on the information the international divorce lawyer has provided.

Next Steps

Finally, the international divorce lawyer should provide advice on the next steps the client should take. This includes whether or not the client has ‘locus standi’ (the right to bring action) in the desired jurisdiction; how best to approach the proceedings so as to appear more favourably in the desired jurisdiction’s Courts; and the likelihood of any possible litigation.

info: Andreas Constantinides BA (Hons), CPE/GDL, LLM, Barrister at Law is an associate lawyer at Stylianos N.Christoforou & Associates in Nicosia. the international investment, business & finance magazine of cyprus

divorce

Utilising trusts as a firewall against costly divorce claims The Cyprus International Trust can go a long way to providing financial assurance By Maria Kyriacou

arely a week seems to pass without a new, highprofile divorce case and dispute over the financial arrangements between the parties. Not all of us may have the riches of Donald Trump but even for people of more modest means, such disputes create great bitterness and are financially and emotionally draining. Is there any way they can be avoided? When entering into a marriage or similar relationship it is natural to expect it to last forever. The sad truth, however, is that many relationships do break down, and if robust financial arrangements are in place, there is one less thing to worry about at an inevitably stressful time. The most common way of dealing with these issues is the prenuptial agreement (“prenup”). It is a binding contract entered into between the parties to a proposed relationship, setting out the financial arrangements which will apply if the relationship ends. Prenuptial arrangements have become commonplace among the wealthy in the USA, particularly when one of the prospective partners is much richer than the other. However, they are not always the answer. Explicitly planning for the eventuality of breakdown seems unromantic, to say the least, and asking a prospective partner to sign a prenuptial agreement before embarking on a relationship could bring the attachment to an end there and then! More importantly, in Cyprus, it is most unlikely that a prenuptial agreement would be recognised by the courts, as such agreements are considered to be contrary to public policy.

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Is there any other means of arriving at the desired end? Once again, the trust, and particularly the Cyprus International Trust if the proposed settlor meets the necessary criteria, can go a long way to providing financial assurance. The trust is a legal concept which originated in England in the twelfth century. Landowners going to fight in the Crusades would transfer legal ownership of their estates to a trusted friend, to collect rents in the landowner’s absence and manage them for the benefit of the landowner’s family, on the understanding that legal ownership would be transferred back once the landowner returned. Out of these arrangements developed the terms used today: the landowner, who “settles” land on a proxy owner is the “settlor”. The person entrusted with the land is the “trustee” and the landowner’s family (or others he nominates) are the “beneficiaries”.

In Cyprus, it is most unlikely that a prenuptial agreement would be recognised by the courts Today, trusts have become an important tool in wealth protection. One type of trusts, namely asset protection trusts, can establish a “firewall” around the settlor’s assets to protect them from claims that

may subsequently arise. Asset protection trusts became popular with professionals, particularly medical professionals in the USA, to provide additional protection over and above professional indemnity insurance. The effects of medical incidents may not become apparent for many years, meaning that claims may emerge long after the event, perhaps even after the individual has ceased to practise and insurance has lapsed. The prudent practitioner may therefore add another bulwark to his defences in the form of an asset protection trust. In personal life, in the light of the substantial awards that courts in certain jurisdictions are making, an asset protection trust may be used to provide added reassurance against claims on breakdown of marriage or civil partnership. By their nature, all trusts provide an element of asset protection, by separating the assets held in trust from the settlor’s general assets, which would be available to satisfy claims against him, including matrimonial claims. However, the Cyprus international trust has a number of additional advantages.

The first is that the Cyprus International Trusts Law contains a very strong presumption against avoidance of the trust. In order to set the trust aside, a claimant must prove that the transfer of assets to the trust was done with the deliberate intention of defrauding persons who were creditors of the settlor at the time when the transfer was made. The burden of proof of the settlor’s intent to defraud lies with the person who is seeking to annul the transfer and any legal action to challenge the trust must be commenced no later than two years from the date the assets were transferred. The Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, to which Cyprus is a party, excludes decisions about the capacity of persons or questions of family law, including personal or financial rights and obligations between parents and children or between spouses, maintenance obligations, questions of succession and of bankruptcy, including those relating to the validity of acts of a debtor. In view of this, the only route open to a former spouse would be

to bring an action against the trustees within the two year period, and to prove intention to defraud. A claimant domiciled outside the European Union would be required to provide security for costs.

An asset protection trust can, and ideally should, be established long before any relationship begins An asset protection trust can, and ideally should, be established long before any relationship begins, and the prospective partner need not even be aware of it, thus avoiding the potential damage to the relationship which might be caused by proposing a prenuptial agreement. A further advantage of asset protection trusts is that they provide a way of regaining freedom to dispose of assets

on death. Many countries, including Cyprus and Russia, have “forced heirship” provisions in their law, requiring a certain proportion of the estate of deceased persons to be reserved for certain relatives. Placing assets in a trust removes them from the estate and from these restrictions. Asset protection trusts can be established quickly and inexpensively. They can therefore provide valuable peace of mind at minimal cost. The Cyprus International Trust is particularly effective and a proposed amendment to the International Trusts Law, currently under consideration by the Cyprus Parliament, will further strengthen its defences. However, individuals’ circumstances vary and there is no “one size fits all” solution. Before any arrangement is entered into it is absolutely essential that proper professional advice is taken to explore whether an asset protection trust is the correct solution and whether it will achieve what is expected of it. Cutting corners on such matters could have serious and expensive consequences.

info: Maria Kyriacou is a Partner and head of the Nicosia office at Andreas Neocleous & Co LLC the international investment, business & finance magazine of cyprus

advertorial

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property

Emerging Trends in the Real Estate Market Dr. Luciano Capaldo FRICS, Europe Chairman, of the Royal Institute of Chartered Surveyors is not optimistic about Europe’s short-term prospects

s Europe Chairman of the Royal Institution of Chartered Surveyors, Dr. Luciano Capaldo divides his professional life between London, Milan and Brussels. With many years of experience in real estate valuation and project/property management, he acts as an independent technical consultant, international arbitrator and strategic advisor to international asset management companies. During his recent visit to Nicosia where he addressed Cyprus’ annual Real Estate and Construction Conference, Capaldo offered Gold his views on the current state of the global property market, along with some insightful data on how different regions in the world are performing. Asked why the real estate sector is so crucial to economies, Capaldo provided a simple statistic: “Given that 65-70% of GDP in Europe is produced through

Trends affecting global real estate

According to the Royal Institution of Chartered Surveyors, the main trends affecting the property market are the following: • The recession is easing but global growth is slowing due to US and European debt concerns • Fiscal austerity packages in the UK and the US are already in place with spending cuts in Europe coming into view • The policy environment in the US, the UK and the eurozone looks likely to remain fairly loose over the medium term to accommodate a sluggish recovery • This has exacerbated the ‘twotier’ recovery in economies and property markets across the globe

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activities linked to the real estate and construction sector, there can be no question about its crucial role in economic growth. It contributes enormously to wealth generation in Europe”. Given that the real estate market in the West has suffered five years of sustained decline, Capaldo is in the unenviable position of leading an industry that is trying desperately to keep its head above water. There is, he admitted, little indication that things are about to get better any time soon. “People are simply not able to sell their properties and the much-feared prospect of a double dip recession is actually here with depressing figures from the European Central Bank to prove it”. Capaldo noted that the global real estate market has effectively become a twotier market where the developed western sector is contracting whereas emerging markets continues to show some recovery. One key statistic, however, that Capaldo pointed to as being somewhat reassuring, is that transaction volumes in the commercial property market are somewhat buoyant. He fears, however, that problems will once again resurface if consistency is not applied

Real Estate Evaluation and the RICS Standards

The RICS (Royal Institution of Chartered Surveyors) valuation standards contain mandatory rules and best practice guidance in the evaluation of real estate assets. As an educator, RICS provides the world’s leading professional qualification in land, property, construction and the associated environmental issues. As an independent organisation it acts in the public interest: setting and regulating the highest standards of competence and integrity among members; and providing impartial, authoritative advice on key issues for business, society and governments worldwide

in the way that valuations and technical due diligence is conducted. In this respect, he believes that the key to achieving sustainability and not another bubble in the real estate sector is for evaluations and due diligence procedures to adhere to universal standards: “A board of directors based in New York or Beijing reviewing an evaluation report on a specific asset should be confident that

This may be an excellent time for strategic investors focusing on global real estate to shift their attention to the Far East

it adheres to the same standards and basis of evaluation as another report produced in Rome, Paris, or Hong Kong,” he explained. “Without this application of a common methodology, there is the inevitable interpolation of values and this is a key culprit in creating problematic issues in the marketplace.” However bleak and depressing the picture may be for Europe, Capaldo makes a convincing argument for why this may be an excellent time for strategic investors focusing on global real estate

to shift their attention to the Far East. Recently released statistics show that core Asia markets such as Hong Kong, China, and Singapore have shown appreciation levels of 5%-40% in the past year alone. In terms of real estate as a buy-to-let investment, the best markets to exploit differences between capital value and rents are Russia, Singapore and Brazil. Capaldo noted that “Sentiment regarding rents and capital values in Europe looks bleak, perhaps zero at best for those EU economies that are not in the immediate

firing line of the debt crisis. However the picture for trouble spots such as Greece, Ireland and Portugal looks very precarious”. Capaldo concluded that due to present uncertainty, emerging trends in real estate are similar to the broader themes seen in the global macro economy, the outlook for which remains in the balance. “Emerging markets are outperforming the more advanced economies, and are likely to continue doing so,” he said.

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property

Getting the Property Market Back On Track New projects could be the key to a turnaround

eorge Z. Georgiou, Managing Partner of the awardwinning law firm George Z. Georgiou & Associates LLC and a member of the Chartered Institute of Arbitrators, is among other things, an expert on land law. Here he speaks to Gold about the state of the property market and his hopes for an upturn in 2012.

Gold: What has happened to investment in the construction sector in 2011?

George Z. Georgiou: During 2011 we have witnessed a huge decline in investment in the construction sector. Although many experts had been hopeful that 2011, and especially the second half of the year, would see an increase in construction, this has, unfortunately, not materialized. According to the Statistical Service of Cyprus, the number of building permits issued is now at its lowest level in years, which does not offer encouraging signs of an increase in construction projects. A total of 4,625 building permits were issued between January and July 2011, representing a decrease of 14.1% compared to the same period in 2010. Moreover, the overall value of the said permits has fallen by 23.8% and the number of residential units has shown a decrease of 39.4%.

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George Z Georgiou

In July 2011, the building permits issued were categorized (right). As the Cyprus Statistical Service notes, building permits constitute an important indicator of how the construction sector may develop in the near future.

The global financial crisis exacerbated the already difficult situation in the real estate sector in 2009

JANUARY - JULY 2011

Project category Residential buildings Non-residential buildings Civil engineering projects Division of plots and roads Road construction Total value of the permits

Gold: What have been the main legal developments in the Cyprus construction sector? G.Z.G.: After many years of discussion, new legislation came into force in April 2011. Known as the Planning Amnesty Laws, they brought an end to a long period of difficulties and obstacles experienced by property owners because of the non-issuance of proper certificates of registration regarding their properties by the Land and Surveys Department for many reasons, some of which related to the need for the legalisation of minor building irregularities. The legislation has also introduced important amendments to the Town and Country Planning Law, the Streets and Building Regulations and the Immovable Property Law (Tenure, Registration and Valuation). Its main purpose was to simplify and modernise the procedures that lead to the issuance of new updated title deeds to property owners. Gold: Hasn’t there already been a change to the original timeframe?

G.Z.G.: Yes. The initial timeframe for subvalue

23.8%

14.1%

mitting the relevant applications was until the end of October 2011 but a 6-month extension has now been given, until 6 April 2012. It is expected that numerous applications will be submitted regarding the issuance of updated title deeds to hundreds of property owners who have been waiting for this development for decades. Moreover, the threat of heavy administrative fines for those who fail to comply with the established procedure is expected to reduce or limit the number of wrongdoers.

Number of Permits 428 99 28 41 5

€177,073,000 Gold: What is your view of how the property market in Cyprus has developed in recent years? G.Z.G.: Purchases of immovable property have fallen dramatically over the last three years, although the starting point can probably be placed in 2007-2008 when demand for real estate was at its peak and prices rose correspondingly. Unfortunately, they did not follow the subsequent reduction in demand and, in this way, contributed to the current negative situation. Of course, an additional factor was, and still is, the global financial crisis which exacerbated the already difficult situation in the real estate sector in 2009.

Gold: You don’t sound very optimistic. G.Z.G.: Actually, I am not unduly pessimistic. I believe that a number of important projects which are currently under development, such as the Marina in Limassol, the Eléa estate development in Paphos and the Limni Golf Resort near Polis, will boost property purchases, especially by foreigners, and bring about an overall rise in the real estate market. The latest financial developments in Cyprus do not help the situation regarding the recovery of the construction industry and the real estate market and major concerns are being expressed about an upturn and the safety of investments. However, it can be argued that it is better to proceed reluctantly than to be afraid to proceed with property purchases. Potential buyers should know that, if they obtain expert advice and do the proper research, their initial reluctance can lead to a successful deal.

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sovereign debt

When History Repeats Itself Have we learnt anything from past financial crises?

By George Theocharides he recent global financial crisis and the current sovereign debt crisis experienced by countries such as Ireland, Portugal, and Greece among others have caused tremendous unrest around the world, influencing the lives of millions of people. We are living in a globalised economy where problems faced by one entity, one sector of the economy or one country inevitably spill over and affect others – a process known as contagion. Thus the problem that started from the bubble in the real estate market and the troubles of the sub-prime-mortgage market in the US spread into the banking sector and on to other sectors of the economy and abroad (mainly because of securitisation and globalisation). Recently, Ireland, Portugal and Greece have had to seek help/ bailouts from the European Financial

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Stability Facility (EFSF). Other countries with substantial public debt and budget deficits might follow and eventually bring the collapse of the eurozone. Cyprus, of course, could not have remained immune to these problems. Since 2008, the country’s budget surplus of 3.6% has become a 5.3% deficit as a percentage of Gross Domestic Product (GDP) for 2010; the public debt has risen from 48.3% to 60.8% of GDP in the same years; the real GDP growth rate has declined from 3.6% to 1%; the unemployment rate went up from 3.7% in 2008 to 7.8% in September 201; the long-term ratings on the country’s sovereign bonds have been continuously downgraded by the international rating agencies and the current levels are: BBB (and on negative watch) by Standard & Poor’s, Baa3 (and with a negative outlook) by Moody’s, and BBB (and with a

negative outlook) by Fitch. Not far from the junk sector! Important questions remain as to the right approach that governments and regulating bodies (the European Commission, the European Central Bank and the International Monetary Fund) – frequently referred to as the Troika – should take to tackle these crises. For a better understanding of the current European debt crisis and the way forward, I believe that it is important to examine past international crises in order to draw some important lessons from them. And in the last few decades, the world has indeed endured some serious crises that had a huge negative impact, not only on the directly-affected countries but also on the surrounding region and, in some cases, the effect was on a global scale.

MEXICO

ASIA

RUSSIA

In the early 80s, we had the Latin American debt crisis, initiated by the default of Mexico. In August 1982, Mexico announced that it would no longer be able to make its debt payments to its creditors, unilaterally declared a moratorium of 90 days, and asked for renegotiation of its payment periods. Prior to the default, Mexico, Brazil and Argentina went through a period of excessive borrowing from international creditors in order to fund their infrastructure programmes. In the aftermath of Mexico’s default, the commercial banks reduced or even halted completely their lending to these countries, resulting in a crisis for the Latin American states which could no longer refinance their massive debt. The banks were then forced to restructure some of the debt and the IMF was called upon to intervene. This was the first serious economic crisis in the history of Latin America, resulting in high unemployment, inflation and economic stagnation. Latin America endured another major crisis in the 1990s, known as the “Tequila crisis”. On December 20, 1994, Mexico was forced to devalue its currency (the peso) by almost 13%. The immediate result was a sharp drop in the Mexican stock market and a steep rise in Mexican interest rates as investors feared the risks posed by Mexican peso securities. Although the Mexican government tried to correct the situation by floating the peso, it was too late. The market had already lost its confidence in the government’s currency policy. But what had led to Mexico’s devaluation? Before devaluation, the country’s currency was pegged to the US dollar and was only allowed to fluctuate within a very narrow band against it. Investors felt confident that Mexico’s Central Bank would adhere to this currency regime and the policy worked well. However, political turmoil in 1994 as well as a spiraling budget deficit, brought unrest leading to the government printing more money which, in turn, created fears of inflation. The end result was a devaluation of the currency. Furthermore, the negative effects of contagion took place as other countries in Latin America (and elsewhere) were affected by investors fearing that the pattern would be repeated.

The next big crisis of the 1990s was the so-called ‘Asian flu” of 1997; starting from Thailand, and spreading to other East Asian tigers such as Indonesia, Malaysia, the Philippines, and South Korea, currencies and stock markets plunged across the region, even in places as far away as Latin America, threatening a global recession. Traditionally, East Asian countries had depended on exports to drive the growth of their economy. Many of them had also pegged their currency to the US dollar to provide stability. This strategy had worked well until 1995 when the dollar began to appreciate against the Japanese yen and other currencies. This led to a loss of export competitiveness which was exacerbated further by the fact that the Chinese yuan had also substantially depreciated against the dollar, making Chinese products more competitive. This outcome slowed down economic growth and led speculators to attack East Asian countries’ currencies, causing massive devaluations. There is another story behind this crisis relating to moral hazard – a situation in which a party that is protected against risk behaves differently than it would if it was exposed to the full level of that risk. A number of East Asian governments had a tendency to instruct their banking and finance sector to fund certain companies or industries that were viewed as economically strategic for the country. For example, in South Korea companies like Samsung or Hyundai Motors, known as “chaebols” (a term used for South Korean business conglomerates), were enjoying massive loans from the banking sector with little regard to their profitability. The outcome was excessive lending without much consideration for the risk involved, which created financial bubbles, especially in the real estate sector. When the bubbles burst and asset prices plunged, there were widespread loan defaults and an increasing number of nonperforming loans. Furthermore, when foreign investors realized that these governments could not bail out everyone, they ran for the exit, causing massive capital flights, plunging currencies and rapidly sinking asset markets. As soon as one country was hit, the process was contagious to neighbouring countries that shared similar problematic issues.

In the year that followed the East Asian crisis, the world was faced with another major setback: the Russian default of 1998 and the subsequent collapse of a number of financial intermediaries around the world, most notably the Long Term Capital Management Group (LTCM). In the years prior to the crisis, Russia had accumulated massive foreign debt and persistent budget deficits. The country was financing this debt by printing more rubles, i.e. increasing the money supply. Russia had also long depended on exports from commodities such as oil, timber, or gold. By 1998 the debt had spiraled to unsustainable levels, commodity prices had fallen and investors feared that Russia would not have the means to repay its debt. That led to a series of speculative attacks on the Russian ruble.

For a better understanding of the current European debt crisis it is important to examine past international crises and to draw some important lessons from them On August 17, 1998, Russia was forced to default on its corporate and bank debt to foreign creditors. It set a 90day moratorium on its payments and abandoned currency support and the printing of more money. The crisis itself, and the action taken by the government in response to the crisis, led to a sharp rise in inflation and a deep recession. As in previous cases, this crisis had a huge impact on other parts of the world, leading to the collapse of a number of financial intermediaries exposed to Russian assets. One of them was LTCM, the most prestigious and successful hedge fund of the 1990s, with two Nobel Prize Winners in Economics (Myron Scholes and Robert C. Merton) on its board.

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sovereign debt

The first serious economic crisis in the history of Latin America resulted in high unemployment, inflation and economic stagnation

ARGENTINA Returning to Latin America, the region suffered another turbulent period in the early 2000s. Specifically, at the beginning of 2002, Argentina suspended payments on its $132 billion public debt, the largest sovereign debt default in history. This government action resulted in a sharp plunge in its currency’s value (70% depreciation by year’s end). To avoid capital flight, the government imposed bank freezes that led to violent riots and a severe economic contraction. Other countries in the region, such as Uruguay, were severely affected as Argentines were forced to withdraw their deposits there to cover the losses incurred from their country’s default. What was the story behind this massive Argentine default? The country enjoyed remarkable success and prosperity in the early 1990s after the launch of the Convertibility Act in 1991. This act effectively pegged the Argentine peso with the US dollar in an effort to control inflation and stimulate growth. However, a number of external shocks (such as the Mexican peso collapse of 1994, the East Asian crisis of 1997, as well as the Russian default of 1998) rocked the Argentine economy. Furthermore, the country also began to suffer from a series of internal problems caused by strict labour laws and excessive government spending. Initially the response of the government was to start privatising state-owned enterprises. When the sale proceeds ran out, the country experienced massive fiscal deficits and public debt, high unemployment, stagnation in economic growth and capital flight. This led to the default in January 2002.

KEY LESSONS The key lessons that can be drawn from the above crises are: • Irresponsible fiscal policy, with excessive and uncontrollable government spending (not properly channeled into long-term projects that would increase the country’s competitiveness and promote economic growth) is not sustainable and will lead to a host of other problems. • Governments should keep the level of their public debt under control. • Investors and markets look for stability, whether within the government or the Central Bank. Otherwise fear will overtake them and this can lead to speculative attacks and capital flight. • Even if countries have their own currency and can apply a monetary policy, fiscal discipline should always be a priority. Increasing the supply of money will lead to inflation and devaluation of the currency. Of course, one can argue that devaluation is not always a negative outcome as it can make a country’s exports cheaper and more competitive. However this will not be sustainable in the long run. • As seen in the case of the Asian crisis, financial markets are ruthless and they will not tolerate corrupt regimes that take dubious decisions and squander money on financially unstable projects. • Given the fact that we are living in a globalised economy, a crisis will likely propagate to neighbouring countries or regions and, in some cases, can become a global phenomenon.

Excessive lending, without much consideration for the risk involved, created financial bubbles, especially in the South Korean real estate sector

n the case of Greece, it seems that the country has no other option than to endure tough austerity measures. Default is not an option, nor is an exit from the eurozone. Such actions would lead to massive capital flight, sharp devaluations of the currency, inflation, rising unemployment, and economic stagnation. Furthermore, a Greek default would endanger the euro and could very likely have a contagious effect on other member states of the eurozone. In the case of Cyprus, there is still hope that the country will manage to survive the crisis provided that drastic structural measures are taken to substantially reduce the budget deficit and public debt, as well as to stimulate growth. If the government does not act immediately with preciselytargeted measures, the country could very well end up seeking financial support from the EFSE with all the negative consequences that it would entail.

info: George Theocharides is an Associate Professor of Finance at the Cyprus International Institute of Management (CIIM) 70

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electronic transactions

The Future of Payments It’s time to wave goodbye to our wallets, says Visa Europe President and CEO Peter Ayliffe

W Interview by Costa Ioannides

hen Peter Ayliffe was appointed Chief Executive of Visa Europe five years ago, he brought with him a solid 20-year-long track record in the UK’s leading high street banks Natwest and Lloyds TSB. During his keynote address to the recent Limassol Economic Forum, Ayliffe offered a glimpse into the future when he believes that the ascent of mobile and contactless payments will make carrying money, credit cards and our trusty wallets a thing of the past. Gold: Many of Europe’s economies are going through a tough time at the moment. How is Visa Europe fairing? Peter Ayliffe: Our business is constantly growing at a healthy rate as more and more transactions take place electronically. Within Europe now approximately one in every eight euro is spent on a Visa card. The figure is even higher for you here in Cyprus with one in every five euro being a Visa transaction. This trend is in healthy – and perhaps surprising – contrast to countries like Germany, Belgium and Switzerland 72

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where Visa card transactions account for less than 10% of point-of-sale transactions. Gold: Apart from the convenience of not having to carry cash, why else should we be glad that your business is growing, given that most businesses are in reverse gear at the moment? P.A.: What many people don’t realise is

Here in Cyprus, one in every five euro is a Visa transaction that although Visa transactions provide a convenience and a safety benefit in not having to carry cash, they also play a vital role in reducing the shadow economy because the transaction is recorded and so has to be accounted for. Did you know that a 10% increase in electronic transactions reduces shadow market activity by 5%? From a macro-economic view, using cash actually leads to reduced tax revenues for the state, reduced protection for workers, lower productivity for companies and slower economic growth. Gold: Given that Visa and other electronic payment providers have led the way in enabling people to execute re-

mote transactions and to access goods and services in other countries, is there anything else that we should be anticipating in the pipeline in way we pay for things in the future? P.A.: Absolutely! The most exciting development is the integration of contactless payments using mobile phones. We are currently in the process of enabling credit cards to be ‘virtual’ in the sense that they will exist on your mobile and not as a physical card. Using this technology, users will just have to be close to a point-of-sale terminal in order to carry out a payment. In effect, your mobile will also become your wallet and you’ll be able to switch between debit or credit cards in the same way as you do, for example, when you flick through photos on an i-Phone. I was actually piloting this system when I used my mobile phone on the London underground. I just had to wave my mobile phone [rather than an Oyster Card] to open the access gates. An excited young man who saw me doing it was so intrigued that he asked me how he could get to do it too! Gold: So, in this future scenario, what if our mobile phone is stolen? Will the thief be able to access all our virtual credit cards? P.A.: Think of it this way, if you lose notes from your pocket, they’re probably gone forever. However, given that only ten or so small-scale consecutive contactless mobile payments will be enabled automatically

Peter Ayliffe

A 10% increase in electronic transactions reduces shadow market activity by 5% without having to re-enter security codes, at €20 maximum per payment, there’s only an absolute maximum of €200 at risk. This will all be guaranteed by the issuing bank and reimbursed in many cases. Let’s not forget that another key benefit of payments being contactless is speed. An average contactless payment takes four to six

seconds at the point-of-sale, versus 12-14 seconds for cash and 27-44 seconds using a conventional credit or debit card. Gold: Are mobile contactless payments the absolute pinnacle for Visa’s vision of the future of payments? P.A.: In truth it’s not the mobile that’s the focus of all of this but the chip technology. Over time this should converge so that EMV [Europay, MasterCard and VISA, the global standard for inter-operation of integrated circuit cards], RFID and SIM chips become one and the same. When you can get to the point whereby you have a

chip that you can place anywhere to wirelessly communicate with anything, including a payment, then maybe that will enable people to make a payment with just a wave of their hand!

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{december 2011}

issue

{money}

76 At the leading edge of international banking services Bank of Cyprus International Banking Services

{business}

80 Steel Force Interview with Galina Gut, Managing Director of Fletcher Group Holdings

+ BOok reviews {economy}

84 How not to go bankrupt while presiding over the EU By Theodore Panayotou 86 Promoting Cyprus Abroad The Cyprus Chamber of Commerce & Industryâ&#x20AC;&#x2122;s Business Forums

{tax&legal}

88 Global Knowledge, Local Expertise This year PwC launched its new brand identity wordlwide 91 The Fixed Annual Levy on Companies The new rules at a glance 92 Taxing times for Russia Interview with Gennady Kamyshnikov of Deloitte in Moscow

Economy: Small Is Beautiful: A Study of Economics as if People Mattered By E.F. Schumacher 85 TAX & LEGAL: Tax Arbitrage: The Trawling of the International Tax System By Nigel Feetham 91 LIFESTYLE: Steve Jobs: The Exclusive Biography By Walter Isaacson 97

{lifestyle}

94 And a Partridge in a Pear Treeâ&#x20AC;Ś Adding up the cost of Christmas

banking

{money}

At the leading edge of international banking services Bank of Cyprus International Banking Services is the specialised Division of the Bank that provides banking services in Cyprus to non-resident individuals as well as companies with international activities. Its clients consist mainly of companies registered in Cyprus or abroad with international activities that have chosen Cyprus as their base

ince the 1970s, Cyprus has been attracting international businesses and investment thanks to the significant advantages it has to offer. According to Louis Pochanis, Senior manager International Banking Services, “With its strategic location, high standard of living, favourable taxation, wide network of double tax treaties, advanced legal and accounting services and a strong local banking system, Cyprus has for many years been the perfect choice for international businesses.” Cyprus’s accession to the European Union in 2004 and its adoption of EU and other international regulatory requirements regarding international business, especially in respect to the prevention of money laundering, have cemented the island’s position as a reputable international financial centre and one of the most respected locations for setting up a company by international businesses. As a result, the country’s professional and financial services sector has experienced rapid growth in recent years and is currently one of the major contributors to the Cyprus economy. Bank of Cyprus was one of the first banking institutions in Cyprus to identify the prospects and understand the dynamics of the international business sector and it has been a pioneer in providing specialised and sophisticated services to meet the needs of this growing and extremely demanding market. Since 1991, when Bank of Cyprus set up

its first International Business Unit (IBU), a specialised branch for servicing international clients, the Bank has developed rapidly to become the leading financial institution in Cyprus in this sector with a market share of over 40% in foreign currency deposits and the first choice for international corporations banking in Cyprus. Through its specialised International Banking Services Division of over 240 highly- trained and experienced professionals and with a network of more than 2,000 correspondent banks, the Bank offers superior services to over 60,000 international clients, some of which are amongst the world’s leading corporations.

The professional and financial services sector has experienced rapid growth in recent years and is currently one of the major contributors to the Cyprus economy International Business Units (IBUs) The Bank operates four IBUs in Cyprus (in Nicosia, Limassol, Larnaca and Paphos), with extended working hours (7.30am-6.00pm Monday-Friday) adjusted to the needs of its clients, the majority of whom reside abroad. The Bank’s clients

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can also directly access their accounts and execute secure transactions 24 hours a day, seven days a week via the advanced internet banking platform, 1Bank. “All the IBUs are supported by state-ofthe-art technology and staffed with highly qualified, experienced personnel specialised in providing efficient and superior service to our international clientele, with a personal touch,” notes Louis Pochanis. “Our high-quality service is enhanced by the customer-oriented organisational structure of the IBUs. All our officers are fluent English speakers and all IBUs are also staffed with officers who are fluent in Russian and other European languages.” Bank of Cyprus also maintains an IBU in Athens, providing a full range of financial services to international clients with investment and business activities in Greece. In addition, it acts as a liaison between Greek entrepreneurs with business activities in countries where the bank maintains a presence and its banking units in those countries.

Products and Services Bank of Cyprus offers a full range of banking and other financial products and services to meet the needs of its wide international client base. These range from traditional banking products such as current accounts, deposits and loans to more sophisticated ones such as escrow agency services, wealth management, foreign exchange services, custody services, etc. Recognizing the importance of offering fast, flexible and reliable international

The greatest challenge is to minimise distances and offer clients the high level of service they expect

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banking

payment services, Bank of Cyprus has invested vast amounts of time and resources to ensure that its clients receive superior service thanks to the latest technology and the highest standards in terms of speed, reliability and security. Conscious of the need to maintain a secure environment for transactions, Bank of Cyprus was the first bank in Cyprus to introduce the use of the Digipass device for transfers to third parties effected via the Internet and/or through faxed instructions. The Digipass generates one-time dynamic security codes used in addition to the subscriber’s reference and PIN numbers. Since a large number of the Bank’s clients are introduced by professional associates (mainly accountants and lawyers), Bank of Cyprus aims at the continuous upgrading of the level of service it offers to this important group. Through the simplification and automation of procedures, it aims to provide solutions that save both clients and associates time and costs, thereby contributing directly to upgrading the level of service offered to the clients they represent. To this end, in October 2010 the Bank launched the IBU Gateway, an innovative electronic system that provides direct access to the Bank’s products and services as well as the functionality of online communication and service between each Associate’s office and the servicing IBU.

Representative Offices In order to enhance its presence abroad and assist its clients who wish to do business in Cyprus without having to travel to the country, the Bank has established a network of Representative Offices in various locations around the world. Specifically, it maintains Representative Offices in Moscow, St. Petersburg, Ekaterinburg, Samara, Kiev, Belgrade, Johannesburg and Toronto. All the Representative Offices assist clients in various ways, including providing them with all the information they need both for Cyprus as well as the Bank of Cyprus Group and its products and services. In addition they liaise between clients and the Bank’s branches in Cyprus and abroad. Bank of Cyprus is now in the final stages of establishing a Representative Office in India, an emerging economy with significant 78

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prospects for the sector. In addition, the Bank is continuously evaluating the possibility of setting up of new Representative Offices in other dynamic economies around the world.

ince the majority of the IBUs’ clients live abroad, the greatest challenge is to minimise distances and offer them the high level of service they expect, which essentially means the fast, efficient and secure management of their accounts from anywhere in the world. “I believe that we have succeeded to a great extent in meeting this challenge,” says Louis Pochanis, “since we enable our clients to choose from an extensive range of servicing channels according to their particular needs. They can choose to be serviced by the IBUs or the Representative Offices as well as through our upgraded Internet banking platform, 1Bank.” Pochanis believes that the most important aspect of the Bank’s success lies in “the

provision of the highest level of personal service and the building of strong, lasting relationships with our clients based on trust and complete confidentiality”. The Bank’s commitment to the highest quality of service and client satisfaction was independently verified in March 2009 when Bank of Cyprus became the first bank to attain ISO 9001: 2008 certification for all its IBUs in Cyprus. This commitment was reconfirmed in October 2011 when Bank of Cyprus International Banking Services, adopting the Principles of Business Excellence, received the internationallly recognised certification of the European Foundation for Quality Management (EFQM) certified Bank of Cyprus International Banking Services at the level “Committed for Excellence” for all its International Business Units in Cyprus and Greece as well as its Representative Offices around the world.

asset management

{economy}

Steel Force

letcher Group Holdings, the acting operational holding company of Fletcher Industrial Equity Fund and treasury of the Group, has its statutory seat and administrative office in Nicosia. The company’s main line of business is asset and corporate finance management, with the volume of assets under the Company’s control currently exceeding US$20 billion. Galina Gut, Managing Director of the company, spoke to Gold about the Group’s activities.

Gold: Given that Fletcher Group Holdings’ main investments are in the metallurgy and transport industries, it’s perhaps not surprising that you are an Engineer in Metallurgy yourself. Galina Gut: It’s true that I graduated from the Siberian Metallurgical Institute and so, in this sense, I have a very good understanding of one of our main areas of investment but I think it’s perhaps more important that I have worked in various management positions for more than a decade. However, my academic background has certainly helped since, as you say, Fletcher Group Holdings’ main investments include NLMK, one of the world’s leading integrated steel companies and one of the top three global steelmakers in terms of market capitalisation in 2010.

Gold: Despite the global financial crisis and the recession in many developed markets, NLMK bucked the trend by posting a new record operating performance. G.G.: Yes, it produced 11.5 million tons of crude steel, representing year-onyear growth of 9%, and the company’s EBITDA totalled US$2.349 billion, an increase of 63% on the 2009 figure. Total 80

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sales in 2010 amounted to 11.7 million tons, representing a 36% rise in revenue which reached US$8.4 billion.

Gold: Definitely a successful year! G.G.: Yes. Last year the company exported products to some 70 countries around the world and won the 2010 “Best Russian Exporter” award from the Russian Ministry of Industry & Trade in recognition of its achievements in the ferrous metallurgy industry. And we are expecting another successful year in 2011. The company now has production facilities in six countries on three continents and we forecast 40% capacity growth by 2012.

Our main investment is NLMK, one of the leaders of the global steel industry and one of Russia’s largest steel manufacturers

Gold: Presumably, even a massive operation like NLMK needs to be constantly upgrading and improving its performance, especially during times of crisis? G.G.: Certainly, and this is why NLMK has focused for more than 10 years now on improving its operational efficiency, investing over US$7 billion in technical upgrades between 2000 and 2010. The company has also acquired licenses to develop greenfield coal deposits. Developing new two coal mines will allow the company to cover 20% of its coal needs by 2015 and to become over 50% self-sufficient in coking coal by 2018.

This year NLMK realized an important part of its development programme by building the first new blast furnace in the country in 25 years, an investment of 43 billion rubles (US$1.36 billion) which will enable the company to grow its BOF steel capacity at Lipetsk by 36%, to 12.4 million tons.

Gold: A great deal of heavy industry across the world has become much more environmentally aware in recent years. Is this the case with NLMK? G.G.: Absolutely. NLMK has been steadily increasing its investment in environmental projects and in 2010, for example, over US$150 million was allocated for minimising the environmental impact of steelmaking. The company has stopped discharging waste water into the river at its main production site and is now recycling 100% of its solid waste and almost all of its by-product gases. These measures have helped it become one of the Top 100 companies in Russia for ecological and environmental management, and the European Bank for Reconstruction & Development has honoured it with an award for Excellence in Sustainable Energy and Climate Change in recognition of its achievements in the area of environmental and social improvement. Gold: Steelmaking is only one of the sectors in which Fletcher Group Holdings Ltd has strategic investments. Tell us about some of the others. G.G.: The Group has a diversified portfolio which includes investments in gas and oil exploration on the Russian Federation’s continental shelf in the Black Sea and the Barents Sea, in Russian energy companies as well as in other sectors such as banking, real estate, services, sport and entertainment. A second major area of investment, however, is the transport and

Galina Gut

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asset management

We take great pride in contributing to the people of the communities with whom we live and work all the companies of the Group focus on delivering results in the right way: by operating responsibly, carrying out their business with excellence and capturing new opportunities for profitable growth. Also, through our Corporate Social Responsibility programme, we take great pride in contributing to the people of the communities with whom we live and work. So here in Cyprus, for the last three years, Fletcher Group Holdings has been one of the sponsors of the traditional CyprusRussia Gala which has become one of the most significant cultural events in Cyprus and one of the most important events related to Russia outside the country. It brings together cultural, political and

logistics sector, particularly in the main commercial sea ports in the northwest and southern regions of the Russian Federation including St Petersburg, Tuapse and Taganrog. These are effected through our subsidiary Universal Cargo Logistics Holding (UCLH) which employs more that 17,700 people in 16 Russian cities and has an annual turnover in excess of 31 billion rubles (US$1.01 billion). It operates four ports, 72 berths, 141 port cranes, more than 500 cargo and auxiliary vessels, 70 passenger vessels, 5 shipbuilding and ship-repairing entities, and 27,000 rail cars, plus expediting services of more than 20 million tonnes per annum. The company’s investments amount to more than 66.2 billion rubles (US$2.16 billion).

Gold: And 2010 was yet another profitable year, despite the economic downturn. G.G.: Yes, 2010 saw across-the-board increases over the 2009 results. For example, cargo handling by the Universal Handling Complex at the port of UstLuga rose by 65% while cargo vessels belonging to the Volga Shipping Company transported 5.5 millionn tonnes of cargo, or 1 million more than in 2009, an increase of 21%. UCLH’s turnover rose by13% while passenger transport was 6% higher than in 2009. In the context of the Group’s development programme, the subsidiary UCL Rail BV, established in the Netherlands for the purpose of consolidating the Group’s railway assets, completed the purchase from NLMK of 100% of the authorized capital of the Independent Transportation Company (NTK) for $325 million. The consolidation of assets under a single UCL Rail brand is being carried out as part of the development strategy of the Group’s railway 82

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division which aims to strengthen its position, increase competitiveness and business expansion in the cargo transport market by increasing railway transport volumes to 110 million tonnes per year and by raising the number of railcars in operation to at least 50,000 within the next three years.

Gold: What is the secret of Fletcher Group Holdings’ success? G.G.: Good question! I would say that

business figures from both countries and the entire proceeds from the annual Gala are donated to the Radiomarathon Foundation, the leading Cypriot charity which helps children with special needs and their families. The Group and I, personally, are very happy to be here in Cyprus and to know that Fletcher Group Holdings is one of Cyprus’s most successful companies in the asset and corporate finance management sector.

austerity measures

{economy}

How not to go bankrupt while presiding over the EU

By Theodore Panayotou

ew doubt that Greece is bankrupt in all but name and, unfortunately, the worst is yet to come. If we in Cyprus do not want to have the same fate during our European Presidency we should do two things: First, we need to understand why Greece is on the verge of complete bankruptcy and, second, we must avoid making the same mistakes by taking the right measures promptly, even though we have already lost valuable time. Greece owes its present predicament to two reasons: First, the delay in taking drastic measures to correct distortions accumulated over decades, along with measures to increase productivity and recover the lost competitiveness of the economy, which allowed the country to slide into the EU support mechanism. The second reason is the punitive austerity measures imposed by the eurozone/IMF Troika in exchange for being rescued, a treatment that has proved worse than the disease: new heavy taxes and deep expenditure cuts which actually killed the economy they were meant to save. It's like someone going to the doctor with heart 84

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problems and the physician prescribes him a strict diet and a daily marathon to strengthen his heart, since the cause of disease has been diagnosed as overeating and a sedentary life for thirty years. Not only will he not manage to complete his first marathon but he will fall into coma halfway. Therefore, let us act promptly and correctly if we do to not want to end up in the intensive care unit of the eurozone and the International Monetary Fund because, as demonstrated by the experience of countries like Argentina, it will take us a decade to recover. Taking only the budgetary measures recommended by the EU and the IMF, (deep spending cuts and additional taxes) would lead us with mathematical precision into the arms of the Troika as growth would turn negative and the budget deficit would become even bigger and unserviceable, as happened in Greece. The International Monetary Fund and the EU may be right in their diagnosis of the problem but their prescription is incomplete, focusing exclusively on the symptoms and ignoring completely the side effects that have proved disastrous. Whatever budget deficit reduction measures we adopt, we must couple them

inextricably with compensatory measures to maintain and increase the demand for goods and services for both consumption and investment, thereby increasing rather than reducing economic activity and, hence, the revenue of the state, making the budget deficit smaller not bigger. The right prescription should be that for every â&#x201A;Ź1 gained from additional taxes, we save â&#x201A;Ź2 from spending cuts and create â&#x201A;Ź3 in new economic activity. Thus we would not only offset the negative impact of new taxes and cuts on market demand and economic activity but we would boost market confidence and economic growth while increasing tax revenues and reducing unemployment. This is the only way to get out of the crisis in months rather than years and to avoid the deep recession we have seen in Greece. As an economist, I urge both the government and the opposition not to lose their way in the black hole of the budget deficit and let the economy go from bad to worse in a vicious circle of cuts and taxes, reduced economic activity, loss of state revenues, further cuts and still more taxes that would push the economy into recession. What should be done? How can we both

reduce the budget deficit and stimulate economic growth without spending lots of money we don’t have and do it quickly? The required measures need only a modest amount of money but a great deal of ingenuity and good planning, imaginative self-financed incentives, legal and institutional frameworks, more flexible labour markets the removal of bureaucratic hurdles and disincentives that hamper economic activity and deprive people of employment and income and the state of tax revenue. First and foremost we need to find immediate ways to increase productivity in the public sector. A wage freeze may be inevitable but deep salary cuts can be avoided if we take immediate steps to increase public sector productivity which is pathetically low and acts as a brake on private sector economic activity. It is of the utmost urgency to introduce a merit-based evaluation of performance right away, together with other incentives such as recognition and reward to boost the productivity of civil servants to assist rather than hinder economic recovery. A second measure should be the restoration of citizens’ confidence and optimism – of consumers and businesspeople alike – which are currently at their lowest level for 30 years. To reverse this negative climate, steps should be taken to increase demand, liquidity and entrepreneurship. There are areas with huge potential such as medical, sports and conference tourism and educational and advisory services which have been floundering for years due to the lack of a legal framework, supporting policies and the necessary infrastructure. Our faltering construction industry could also be revived with a legal framework and a policy to promote the gradual transformation of private and public buildings and infrastructure into energy-efficient structures saving millions in energy costs, as required in any case by European Union directives. We have abandoned efforts to increase Cyprus’ industrial activity, blaming the country’s small size, non-competitive salaries and competition from low labour cost countries such as China and India. But the huge success of award-winning companies such as Medochemie and

Enfoton, which export pharmaceuticals and photovoltaics respectively to other EU countries – even Germany – shows that there are good export opportunities for Cyprus in high technology industries. A third set of measures should aim to reduce growing unemployment and employment uncertainty which are slowing down demand and exacerbating the negative sentiment in the market. We must take immediate action to train unemployed university graduates in occupations with a future, and create business startups and innovative products and services utilising new technologies that not only employ people themselves but create jobs for others. For this we need strong, user-friendly incentives, including the creation of a venture capital fund.

In Greece, new heavy taxes and deep expenditure cuts actually killed the economy they were meant to save

A fourth measure is to privatise semigovernment enterprises such as Cyta, the EAC and Cyprus Airways in order to limit the role of – and cost to – the state in matters of genuine public interest and to stimulate competition and economic activity. As a by-product of such a move, which will sooner or later become unavoidable, significant funds would flow into the state coffers to be used for further measures to stimulate economic growth and regain our lost international competitiveness. If Cyprus takes these and related measures, together with budget cuts and limited tax increases, it still has the opportunity to escape the Sword of Damocles of the EU/IMF support mechanism which entails tough medicine and a loss of sovereignty, and march into the EU Presidency feeling proud that we have managed our own problems and demonstrated a model that others in our position can emulate.

BOOK REVIEW Small Is Beautiful: A Study of Economics as if People Mattered By E.F. Schumacher (Vintage, 2011) RRP: £8.99 (£5.89 from Amazon.co.uk)

his classic study of world economies, first published in 1973, is now available in a new edition to celebrate the centenary of E.F. Schumacher’s birth. Its relevance to the presentday is astonishing. The author had predicted many of the issues now at the forefront of environmental economics: the political/social/ oil problems of relying on exports/ imports, the energy crisis, dual economies in developing countries and the associated social unrest, and most importantly, the problems of conventional wisdom/paradigm inertia in classical economics. Inspirational and thought-provoking Schumacher was decades ahead of his time. His basic premise is that fossil fuels are capital, and yet we consume them as if they are a revenue stream, which is destructive. Instead we should spend our capital resources in order to create the infrastructure for sustainability. When it was first published almost 40 years ago, the book inspired the organic movement and formed the intellectual basis of much of today’s environmentalism. Moreover, what Schumacher calls Buddhist Economics remains a valid recipe for survival against the threats of peak oil, climate change and pollution.

info: Dr. Theodore Panayotou is Director of CIIM and Professor of Economics and the Environment at Harvard University. He has served as consultant to the UN and to governments in the US, China, Russia, Brazil, Mexico and Cyprus. the international investment, business & finance magazine of cyprus

promoting Cyprus

{economy}

Promoting Cyprus Abroad Business Forums organised recently by the Cyprus Chamber of Commerce & Industry (CCCI) and the Ministry of Commerce, Industry & Tourism in Poland, the Czech Republic and Norway have proved to be extremely successful in promoting Cyprus as an important international financial and business centre.

By Numbers* Christos Petsides

Of the CCCI’s three most recent trade missions, the one to Poland stood out not only for the amount of interest shown by businessmen but also for the broad media coverage it received, Christos Petsides, Director the Chamber’s Services & Trade Department told Gold. “As the current holder of the EU presidency, Poland is a country with great prospects in our view and we expect to see increased cooperation between the business communities of our countries in the near future”. Petsides expressed his conviction that the CCCI business forums are partly responsible for the continuing rise in the number of companies being set up on the island by foreign interests, despite the global financial crisis. “Moreover, many participants from Cyprus participate repeatedly in the forums so they clearly feel that they are gaining too.” The next CCCI trade mission will be to Israel in January.

Public debt of GDP

GDP GDP per capita

Czech Republic

Norway

Poland

38.9%

49.7%

52.8%

$261.3B

$255.3B

$721.3B

25,600

54,600

18,800

Unemployment

Population

3.6%

10,190,213 4,691,849

12.1%

38,441,588

Public debt

(% of GDP est. 2010)

38.9% Key Industries Motor vehicles, metallurgy, machinery and equipment, glass, armaments

49.7% Petroleum and gas, food processing, shipbuilding, pulp and paper products, metals, chemicals, timber, mining, textiles, and fishing

52.8% Machine building, iron and steel, coal mining, chemicals, shipbuilding, food processing, glass, beverages, textiles

*Source: CIA world factbook 2011 86

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Czech Republic The Business Forum in Prague was organised with the support of the CyprusCzech Republic Business Association, under the auspices of the CCCI, the Cyprus Trade Centre in Vienna and the Czech Chamber of Commerce. Czech lawyers, accountants and other businesspeople attending the Forum showed considerable interest in developing greater cooperation with Cyprus and in using Cyprus as an intermediary via which Czech businesses may expand their activities to the Middle East and other European countries.

• Skoda Auto, one of the largest car manufacturers in Central Europe, is based in the Czech Republic.

In the course of the Forum, an invitation was addressed to the Czech Chamber of Commerce for a visit by Czech entrepreneurs to Cyprus and consultations on this matter will continue. • The Czech Republic is the second richest country in Eastern Europe, after Slovenia.

On the sidelines of the Forum, representatives of the Cypriot delegation had a meeting in the Czech Senate with Petr Pakosta, Senator for National Economy, Agriculture and Transport. Economic ties between Cyprus and the Czech Republic were discussed and ways were proposed for further economic cooperation between the two countries.

• In the list of countries by the Human Development Index (the composite statistic used to rank countries by level of human development) Norway has ranked in 1st place 9 times in the last 11 years and has held the top ranking since 2007

Norway In Oslo, the Business Forum on Cyprus was hosted by the Oslo Chamber of Commerce and organised by the CCCI and the Cyprus Ministry of Commerce, Industry & Tourism, in association with the Cyprus-Nordic Countries Business Association and the Cyprus Trade Centre in Berlin. • According to the IMF Norway is the 4th richest country in the world (by GDP per capita income) after Qatar, Luxembourg and Singapore

Distinguished speakers from Cyprus explained to the Norwegian attendees the country’s strategic importance, its favourable tax system, excellent infrastructure and high quality of professional services in many sectors including banking, shipping, medical services and real estate. • Each year in October, the Tax Record for every adult Norwegian is published for anyone to read and see

• Former tennis champion Martina Navratilova, statistically the second best female player of the 20th century after Steffi Graf, is a Czech.

• Polish-born astronomer Nicolaus Copernicus (14731543) was the first person to propose that the earth was not the centre of the universe.

Eight companies made up the Cypriot business delegation. The main areas of interest for cooperation between the business communities of the two countries are the legal, accounting, financial, energy and property sectors.

Poland

• Marie Curie (born Maria Sklodowska, 1867-1934), was the first and only Nobel laureate in two different sciences and the first female professor at the Sorbonne University.

Presentations in Warsaw and Poznan on investment opportunities in Cyprus and the potential for business partnerships were attended by Polish lawyers, accountants and other entrepreneurs who were informed about the advantages of Cyprus’ Tax System to foreign investors, the procedures for the setting up of Cypriot companies, the island’s banking system and Cyprus as an International Business Centre. An invitation was extended to the Polish Chamber of Commerce to organise a visit by Polish entrepreneurs to Cyprus. The undertaking was supported by the Cyprus-Poland Business Association under the auspices of the CCCI, the Cyprus Trade Centre in Poland and the Polish Chamber of Commerce.

• Poland boasts Nobel Prize winners, including four Peace Prizes and five in Literature.

Gold is media sponsor of all the CCCI’s foreign trade missions and business forums abroad. the international investment, business & finance magazine of cyprus

professional services

{tax&legal}

Global Knowledge, Local Expertise The establishment of PwC, through the 1998 global merger of two major professional services organizations – Price Waterhouse and Coopers & Lybrand – created a leading professional services firm in the field of audit, tax, regulatory compliance and advisory services that is shaping global developments. Evidence of the local development of PwC is the fact that the organisation comprises almost 1,000 people, including 46 partners.

(L-R, seated) Liakos Theodorou, Evgenios Evgeniou, Costas Mavrocordatos (L-R, standing) Theo Parperis, Christos Themistocleous, Phillipos Soseilos, Angelos Loizou

his year PwC launched its new brand identity worldwide which, beyond the visual change, marks a new concept in its professional activities. The firm’s brand promise is to build great relationships with clients and help them to create the value they are looking for. Evgenios Evgeniou, Managing Partner of PwC, stresses the importance of building relationships: “We listen to our clients so 88

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Cyprus can play a significant regional role in the achievement of Europe’s energy goals as to acquire a thorough understanding of their business and their needs. We treat their requests with urgency and respect,

and we work hard to exceed their expectations, focusing on quality and integrity.” PwC’s strategy is based on the desire to provide client-oriented, market-relevant services that bring together a breadth of skills and expertise in integrated teams. The global knowledge of the PwC international network, combined with the expertise of local professionals, aims to proactively address both client and market needs. Quality, specialisation and a focus on client service are the drivers of

growth for PwC. “PwC Cyprus provides its services to local and international clients operating in all market sectors. Our clients vary from small startups to well-established, local family businesses through to large multinational organisations. We service all our clients with the same degree of quality and emphasis on adding value,” says Liakos Theodorou, Head of Assurance & Advisory Services whose department deals in Financial Assurance, Risk Assurance Consulting, Performance Improvement Consulting and Deals and Corporate Finance. “Our primary goal is to build strong business relationships based on trust. This objective can be achieved only through total commitment to quality and by proactively addressing our clients’ needs” adds Costas Mavrocordatos, Head of Tax & Legal Services. The firm’s network tax and legal services include Global Compliance Services, Direct and Indirect Tax Services, Services to Small and Medium Enterprises and Legal Services. PwC Cyprus is continuously enhancing its industry specialiSation in order to help clients address market opportunities. Its recent publication entitled Cyprus hydrocarbon opportunities is a good example of this. PwC believes that the indications of the presence of significant quantities of hydrocarbons in Cyprus’s Exclusive Economic Zone and the decision to proceed with their exploration may prove to be a tremendous opportunity for the island. The EU has its own ambitious energy objectives and, if successful with its hydrocarbon exploration, Cyprus can play a significant regional role in the achievement of Europe’s energy goals. As a long-established international financial centre, Cyprus is one of the main gateways for investments to and from Eastern Europe. It has gained this enviable position because of its favourable tax regime, its highly educated workforce and its excellent infrastructure facilities. On the taxation side, it offers the combination of a competitive corporate tax rate and a network of double tax treaties which helps to maximize after-tax returns for investors. “Cyprus has a tremendous opportunity to become the EU financial centre facing

We need a new, realistic vision for economic development and a clear economic direction as a services economy and energy centre

East. To achieve this, however, we need to regain the trust of international markets, create conditions which encourage entrepreneurship, deal effectively with increasing competition from other jurisdictions and responsibly manage the prospects created by the extraction of natural gas. In short, we need a new, realistic vision for economic development and a clear economic direction as a services economy and energy centre. PwC will continue to contribute in this effort” says Managing Partner Evgenios Evgeniou. For PwC, Corporate Social Responsibility (CSR), accompanied by specific, concrete work, is a self-evident concept inscribed in the foundations of the organisation. “Having an awareness of important social and environmental issues is not simply an extension of our work; it is a way of life. Our contribution to the community and our efforts to improve the quality of our own lives and the lives of those around us make a difference,” says Liakos Theodorou, Head of Assurance & Advisory Services. PwC’s CSR strategy is based on five pillars: Environment, Giving, Volunteering, Corporate Community Leadership and Pro-Bono Professional Services. This strategy is implemented with the direct involvement of staff. PwC believes that people are the key drivers of success for the organisation, which continues to enhance the value of its people and to invest in their development so as to be close to its clients and support them in successfully addressing new business challenges. “Our obligation and responsibility is, first and foremost, to safeguard the future and

take the organisation forward, to further strengthen our leadership position. This represents a great challenge and we are judged daily on how effectively we deal with this,” notes Evgenios Evgeniou.

Theo Parperis, In charge of Global Compliance Services

Christos Themistocleous, Partner, Head of Quality, Risk Management & Independence

Phillipos Soseilos, Partner, Head of Human Capital

Angelos Loizou, Partner, In charge of services to Small and Medium Enterprises

Liakos Theodorou, Head of Advisory & Assurance Services

Evgenios Evgeniou, Managing Partner PwC Cyprus

Costas Mavrocordatos, Head of Tax & Legal Services

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at a glance

{tax&legal}

The Fixed Annual Levy on Companies BOOK REVIEW

By Phivos Theocharides

s from 2011, all registered Cyprus companies are obliged to pay an annual charge of €350 in order to be in good standing and to remain on the register of Cyprus companies at the Registrar of Companies. For Cyprus companies which belong to a group of companies, the total amount of annual charges may not exceed €20,000, so this cap only applies to a group comprising more than 57 Cyprus companies.

Time limits for payment Companies have an obligation to pay the annual charge by 30 June of each year. For 2011, the deadline for payment is 31 December.

Who is obliged to pay? Companies registered in 2010 or earlier are obliged to pay the charge of €350 for this year by 31 December 2011 and must pay €350 by 30 June of each subsequent year. For example, a company registered on 25 April 2009 has an obligation to pay the charge of €350 by 31 December 2011 and then €350 by 30 June 2012 and, thereafter, €350 by 30 June of each subsequent year. The obligation for payment commences in the year subsequent to the year of incorporation. Companies registered in 2011 and after are obliged to pay the charge of €350 annually by 30 June of the following year. So, for example, a company registered on 20 February 2011 is obliged to pay €350 by 30 June 2012 and, thereafter, €350 by 30 June of each subsequent year. A company registered on 12 January 2012 will have to pay the annual charge by 30 June 2013 and, thereafter, €350 by 30 June of each subsequent year.

Penalties for late payment • In case of a delay of up to two months there is a 10% penalty. • In case of a delay between two and five months there is a 30% penalty. If a company does not comply with its obligation to pay the fee within the abovementioned time limits, the Registrar of Companies can proceed with striking off the company from the register of companies. This means that after the fifth month of delay, the Registrar of Companies may refuse to issue any certificates (including certificates of good standing) or to proceed with any applications for changes at the Registrar of Companies. A company may be automatically reinstated within two years from the date of strike-off from the register provided that a fee of €500 (in addition to the outstanding amounts of the charge) is paid. A company may be reinstated after two years from the date of strike-off from the register provided that a fee of €750 (in addition to the outstanding amounts of the charge) is paid.

Exemptions Subject to the discretion of the Registrar of Companies, the annual charge of €350 does not apply to the following companies: • Companies with neither assets nor turnover • Companies with assets but no turnover • Companies with turnover but no assets • Companies with assets in the occupied areas, i.e. not controlled by the Republic of Cyprus. Examples of companies that do not have to pay include shelf companies and holding companies with no income arising from their holding activity.

info: Phivos Theocharides is a Director of HTT Audit Limited 90

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Tax Arbitrage: The Trawling of the International Tax System By Nigel Feetham (Spiramus Press, 2011) RRP: £79.95 (£72.73 from Amazon.co.uk)

s the distinction between tax avoidance and tax evasion continues to be broadly misunderstood, this book aims to look at tax arbitrage and demystify its practice. It is particularly relevant in Cyprus, where international tax arbitrage is a form of legitimate tax planning. The term appears to have originated just five years ago in the Wall Street Journal when it was described as a system which “plays off one nation’s tax system against another to reduce the banks’ tax bills” and it is defined here as “a commercial activity that...seeks out differences in tax rules in two or more jurisdictions to achieve a tax benefit.” The book considers the confusion over the boundary between legality and morality and the role of jurisdictional competition in tax avoidance and the approach taken by a number of countries (including the UK, Ireland and Netherlands) to fiscal policy. The appendices include the UK Code of Practice on Taxation for Banks. Given the price of the book, the author and publisher clearly believe that reading it will bring far greater financial benefits.

russia

Taxing times for Russia {tax&legal}

Cyprus can do well in the next decade, says Moscow tax expert

By John Vickers

ennady Kamyshnikov, Head of the Tax & Legal Department at Deloitte’s Moscow office, began his career as the new Russia was emerging after the collapse of the Soviet Union. The Russian tax system was set up on 1 January, 1992, so he has been there from the very start. “I’ve seen everything,” he tells Gold, “including the biggest changes in recent years. Ten years ago, tax was the number 2 or 3 issue that bothered foreign investors. Today it’s down to 7 or 8 on their list. Personal income tax in Russia today is by far and continuously the lowest in the world at a flat rate of 13%. When the rate was 30%+ which you now have in Cyprus, the rate of non-compliance went through the roof. People were hiding their income and the government needed to do something about it so the Russian government took a decision more than 4 years ago to reduce personal income tax to such an extent that people are no longer willing to risk cheating the system.”

If your contract is more than €60,000 a year, you will be classified a ‘highly qualified professional’ and you will pay 13% income tax Today, it is not only Russian citizens who benefit from this astonishingly low rate of income tax. As part of its efforts to turn Moscow into an international finance and services centre, the government has 92

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Gennady Kamyshnikov

taken a number of important steps to make it more attractive to foreign companies: “From this year a new, simplified visa regime has been put in place for highly qualified professionals,” explains Kamyshnikov. “The tax rate of 13% used to be applicable only to permanent residents while those classified as nonresidents paid 30% – a considerable difference. But the government has been very smart about this. After long discussions about who should be considered a ‘highly qualified professional’ and lots of talk about studies and diplomas, it was decided that the only criterion should be how much such an individual should be earning. If your contract is more than €60,000 a year, you will be classified a ‘highly qualified professional’ and you will pay 13% income tax.” As more and more countries become part of the global economy, there is ever greater unification of laws and systems. The Big Four accounting firms absorb

news from around the world regarding trends, treaties, tax rates and tax avoidance, filter it and pass on their conclusions to the government. Firms such as Deloitte play what Gennady Kamyshnikov describes as “a very large role” in the negotiations that lead up to the planning and drafting of new laws with the Russian government. “For example,” he says, “we wrote the first draft of the regulations on participation exemption for dividends. Then we stepped away from it and let them do what they wanted with it because we are not lobbyists. We are constantly proposing ideas to the government and, fortunately, they are willing to absorb them.” The Moscow financial centre project began three years ago and Deloitte is heavily involved in this, with its global CEO a member of the advisory council to President Medvedev which proposes changes to civil and financial law. However, making a place attractive to foreign investors goes beyond legal matters.

Cyprus needs to focus on being a central point in the Mediterranean between the Arab world, the EU countries and others

“When I talk to friends who come to Moscow, they tell me that they don’t find it very welcoming, “he says. “And I know that It’s difficult to move around, taxis aren’t identifiable, etc. The Moscow government is currently working on public transport and hotel development but there is still a great deal of infrastructure work to be done. Cyprus, by contrast, already has the infrastructure. I was amazed to walk through the new airport! And there are always taxis, the hotels are excellent and everyone speaks English. These things are extremely important.” Kamyshnikov also notes the fact that Cyprus’s legal system is not only understandable but based on English law, one of the most preferred in Europe. However, he detects that Cyprus, too, has areas that require improvement: “I see a lack of clarity regarding certain aspects of financial law. How do you operate with securities here? What are the guarantees for investors? Is it risky or non-risky to trade under Cypriot law in Cypriot securities and non-Cypriot securities? This whole area lacks clarity. Then there is also the issue of macroeconomic stability which I think will be the number one concern of investors if Cyprus wants to gain a reputation as an international financial centre. Exposure to Greece at the present time and a lack of country resources in the long-term are a huge issue.” Regarding the hoped-for benefits for Cyprus of possible natural gas deposits, Kamyshnikov sees them as “politically extremely important” but notes that it will take a number of years to develop natural gas and turn it into something profitable. “The next couple of years won’t really be affected by it,” he says. “What Cyprus needs to focus on being a central point in the Mediterranean between the Arab world, the EU countries and others. And once it is removed from the “black list” of the Russian Ministry of Finance, it will be the number one country for Russian companies to go through into Europe. There is no doubt about this.” Like Cyprus, Russia had been hoping to avoid the worst of the global financial crisis

but the inevitable happened. “In the end it hit and it hit very hard,” Kamyshnikov recalls. “Despite the size of Russia’s territory and the country’s resources, we are still a small economy so when things go bad they really go bad. Luckily, the Russian financial system was saved by the state, which bought out all the banks and real estate companies that were in especially deep trouble. The government also acted wisely by not spending a lot of resources. In the last year, growth has definitely restarted and we’re now seeing some positive numbers but they’re not double-digit. Things are no longer as bad as they were in the 2008-2009 crisis but the number of public offerings, for example, has slowed down to very few due to the drop in the markets. We had many clients who were preparing for an IPO but almost everything stopped.”

Macroeconomic stability will be the number one concern of investors if Cyprus wants to gain a reputation as an international financial centre So is Gennady Kamyshnikov optimistic about the future? Not exactly: “I’ll cite the former Minister of Finance who said that the next ten years will be the ‘lost years’ for the global economy. It’s probably not pessimism either but realism, unfortunately. I think that things will actually be better for Cyprus because it’s very clear that there will be huge movements of capital all over the globe. Cyprus, may not have its own huge wealth but it is an enabler of the movement of capital so, provided that it remains welcoming, open-minded and liberal, I believe that it will do well. My opinion for Russia is that we’ll be experiencing gradual slow growth which will be quite stable. Unfortunately some other countries, such

as Greece, are destined to go through very difficult times.” There remains one factor which, according to Kamyshnikov, is not being paid enough attention but is going to play a key role in many economies over the next ten years: climate change. “These changes are happening and countries need to be prepared, he says, noting that while Central Russia is used to the fact that the climate spans a range from -35 to +35 degrees and the population is used to a lot a snow as well as a lot of heat, other countries are going to experience much more drastic effects. “Places like the Maldives in particular but also Portugal, the UK and northern France are going to see huge changes that will require major infrastructural reforms. It’s more than global warming: we’re talking about broader climate change and its effect on the economy.” One response to this is clean technology which Kamyshnikov describes as “the new industry” which is developing rapidly in many countries, mostly in Asia, though interest is developing in the US and elsewhere. “Deloitte’s head of cleantech told me recently that he was amazed by how much time he would have to spend in Asia because four fifths of investments there are in cleantech projects.” Together with cleantech, renewable energy sources are also going to be playing an increasing role in economies around the world, including that of Cyprus. Gennady Kamyshnikov is aware of the island’s wind farms (I’ve seen the windmills near Larnaca but they weren’t turning! My understanding of wind generation is that, to make it profitable, you have to install dozens of them.”) but he suggests that solar power makes more sense for the island. “You can’t do anything about the very hot weather but you can make good use of it. With the development of nanotechnology around solar power generation I would expect Cyprus to be there. Given the remarkable speed of development of technology, especially around electricity generation, this may be Cyprus’s big chance.” the international investment, business & finance magazine of cyprus

christmas

{lifestyle}

And a Partridge in a Pear Tree... Adding up the cost of Christmas

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By Nathalie Kyrou

The 12 Days of Christmas In 2010, it would have cost €17,325 to buy/ hire all 364 gifts in this traditional song. Romantics unable to avoid the financial crisis may wish to avoid the duplication of the presents to save money and keep them down to a more sensible 78 Christmas offerings to a loved one. Five gold rings will be even more expensive this year… On the first day of Christmas, my true love sent to me A partridge in a pear tree. On the second day of Christmas, my true love sent to me Two turtle doves, And a partridge in a pear tree. On the third day of Christmas, my true love sent to me Three French hens, Two turtle doves, And a partridge in a pear tree. On the fourth day of Christmas, my true love sent to me Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree. On the fifth day of Christmas, my true love sent to me Five gold rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree. On the sixth day of Christmas, my true love sent to me Six geese a-laying, Five gold rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree.

On the seventh day of Christmas, my true love sent to me Seven swans a-swimming, Six geese a-laying, Five gold rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree. On the eighth day of Christmas, my true love sent to me Eight maids a-milking, Seven swans a-swimming, Six geese a-laying, Five gold rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree. On the ninth day of Christmas, my true love sent to me Nine ladies dancing, Eight maids a-milking, Seven swans a-swimming, Six geese a-laying, Five gold rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree. On the tenth day of Christmas, my true love sent to me Ten lords a-leaping, Nine ladies dancing,

Eight maids a-milking, Seven swans a-swimming, Six geese a-laying, Five gold rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree. On the eleventh day of Christmas, my true love sent to me Eleven pipers piping, Ten lords a-leaping, Nine ladies dancing, Eight maids a-milking, Seven swans a-swimming, Six geese a-laying, Five gold rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree. On the twelfth day of Christmas, my true love sent to me Twelve drummers drumming, Eleven pipers piping, Ten lords a-leaping, Nine ladies dancing, Eight maids a-milking, Seven swans a-swimming, Six geese a-laying, Five gold rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree!

ave you ever wondered how much Christmas costs? Twenty-seven years ago, the chief economist at PNC Wealth Management did, and so he decided to figure it out by finding out how much it would cost to buy each of the gifts in the song The 12 Days of Christmas. Thus the birth of a formula to calculate the cost of Christmas, and an economic tradition that continues to this day. PNC has been tallying the annual Christmas Price Index since 1984, by tracking how the price of every gift has changed, then adding up the prices of all 78 gifts in the song to get the Total Cost of Christmas for that year. The PNC Christmas Price Index is similar to the Consumer Price Index, and although the goods and services in the former are obviously far more whimsical than in the latter, most years their price changes closely mirror each other. It’s a fun way to measure consumer spending and trends in the economy… and the pop-up book animation on their website illustrating all of this is an interactive, bundle of delight.

It is important to note that The PNC Christmas Price Index (CPI) shows the current cost for one set of each of the gifts given in the song, whereas the True (Total) Cost of Christmas is the cumulative cost of all the gifts when you count each repetition in the song—so it reflects the cost of 364 gifts. In 2010, the PNC CPI was €17,325, a 9.2% increase over 2009 and the largest increase yet since 2003 (when there was the largest jump in the history with an incredible 16.0% rise). So what has changed over the years? the international investment, business & finance magazine of cyprus

christmas

Firstly, the Internet. Today, it is easier for us to find the goods and services listed in the song on the net. This convenience comes at a price, however, since online sales tend to be more expensive than those purchased in a more traditional transaction, mainly due to added shipping costs (as fuel prices fluctuate, they have a major effect on the cost of shipping).

Despite ongoing economic problems, people continue to spend, often more than they can afford Over the last 27 years, the price of services has also increased, even though the price of goods has decreased. The cost of entertainment, with regard to wages and benefits for entertainers, has also greatly increased over the last 20 years. As a result, the ladies dancing and lords a-leaping have seen a 300% rise in their fees over Christmas 2010. The jump last year can also be attributed to rising gold commodity prices, represented by the Five Gold Rings which went up by 30%. In keeping with inflation, the Christmas Price Index tends to keep getting more expensive, but the True Cost of Christmas, however, seems to fluctuate over the years. 2010 was the most expensive year for that measure at €71,570. The two years previous to that were just a bit less expensive at €64,606 in 2009, and €64,019 in 2008. Prior to that, the costliest year was 1994. In general, it would be fair to say that the Cost of Christmas has gone up, despite current

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weak economic trends, and this is predicted to continue. Are there other factors and changes in economic spending which may more aptly reflect current trends and consumer behaviour over the Christmas season? Take something as simple as a Christmas tree. We all know the debate over real or artificial. Some people are as determined that artificial trees are the way to go for convenience and cost as others are adamant that Christmas is simply not Christmas without a natural tree. Trees are big business and growers in the US in particular have been complaining for years that they are being hurt by the artificial tree industry. In response to their pleas, the US Department of Agriculture recently gave its approval to levy a $0.15 tax per Christmas tree, which would raise about $2 million to go to a 12-member Christmas Tree Promotion Board. The panel would promote fresh Christmas trees over artificial ones (somewhat ironically, all this has happened in 2011 – the International Year

of Forests…). As the Heritage Foundation put it: “The taxman got an early Christmas present from the Obama administration.” Finally, however, following criticism, the

US President announced that the proposed tax would not be imposed after all. Well, not for now anyway. The chances are that this won’t be the last we’ll hear about a tax on Christmas trees. With the threat of impending taxes and the weight of those already in place, people are doing what they can to cut costs. It was reported in the British press recently that more and more people are planning a ‘Secret Santa’ system of exchanging gifts this year to reduce their expenses. A study has found one in four are thought to be changing their Christmas spending habits by selecting just one member of their family or group of friends to buy a gift for. A survey by American Express (Amex) found that 68% of the 2,000 people quizzed will agree a financial limit on what to spend on their partners this year. Meanwhile, 38% will ask for specific presents to make sure they receive what they want. Almost half said they would request gift lists from their loved ones to avoid money going on unwanted presents, and just over one in three plan to give vouchers or money. Nevertheless, a quarter of parents plan to splash out in excess of £100 (€116.78) on gifts for their children, while a fifth of adults expect to spend more than £100 on their partner. Interestingly, British families on average spent the following on Christmas: £260 (€303.64) in 2007, £307 (€358.53) in 2009, and a predicted £364 (€425.10) in 2011. The price keeps creeping up, despite financial woes; Christmas has taken the idea of “a time for giving” to a whole new level. It’s not just the Cost of Christmas that keeps escalating, but also the Cost of Advertising Christmas. Take, for example, the hype surrounding the UK’s latest John Lewis Christmas TV commercial featuring a kid anticipating Christmas morning when he can finally give his gift to his parents. It is simple – no special effects, lavish sets or famous actors – and touching to watch (which is probably why it was very well received by the public), but it apparently cost €7 million to make. In

the age of eurozone bailouts, that may not sound like much, but given that the advert is only a minute and a half long, that is almost €82,000 a second, much more than even the most expensive Hollywood blockbuster. While the production expenses of the commercial don’t seem to justify its cost, it could be argued that advertising is all about: divorcing objects from their real value and this is especially true at Christmas. It may be because such advertising succeeds that we are willing to spend more on a product or service than it is really worth, and perhaps that is why the cost of Christmas keeps increasing. It is no wonder, therefore, that despite ongoing economic problems, people continue to spend, often more than they can afford. Indeed, “Christmas is the season when you buy this year’s gifts with next year’s money”. If you want to cut your expenses, though, experts advise to get the best credit card out there, trim your travel costs, make the most of vouchers, call overseas for free if possible, and start saving up for next year. Fortunately you don’t need to eliminate all the partying. The strangest piece of tax advice, as reported in UK’s best selling

begin the Christmas shopping season early? In America, the day after Thanksgiving, known as Black Friday (Friday, November 25 this year) is the day which has been reported as the busiest shopping day of the year for numerous years in a row. Interestingly, the term ‘Black Friday’ has been used in multiple contexts, going back to the nineteenth century, where it was associated with a financial crisis in the US in 1869. Nowadays, Black Friday is a day to spend, spend, spend… and it is even a public holiday in some states. Notwithstanding, Christmas no longer has to be the proverbial race to see which gives out first – your money or your feet. Shopping is not only done in stores anymore; now, you can shop with your feet up, from the comfort of your own home. Record online consumer spending is predicted on Christmas Day this year as with previous years; last year almost a million online transactions were made throughout the day as retailers launched their seasonal sales on Christmas Eve. 2010 was also the year when Visa Europe predicted £833,000 would be spent every minute on 23 December. In 2007 and 2008, the busiest

financial magazine MoneyWeek, is, strangely enough, to throw a Christmas party! If there are just a handful of you and you keep within the British taxman’s £150 a head exemption, which extends to a guest (such as a spouse or partner), you can claim back up to £150 a head from the company. Just make sure that the hotel and/or restaurant is booked in the firm’s name, and that a director is authorised to pay the bill personally. That way you can have fun while still living up to the many holiday card greetings which wish you “A happy and prosperous New Year”. Unfortunately, not everywhere is as organised as the UK’s Department of Inland Revenue. When we mentioned this idea to colleagues in Cyprus, they laughed… Clearly, the Christmas season is all about money. What better way, then, for companies and retailers to profit from all this than to

days for spending were also 23 December. Another day when shopping is at its peak is the day after Christmas (Boxing Day, 26 December) when sales begin in many countries and people go into a spending frenzy. In Cyprus, the busiest days for shopping are the Saturday before Christmas and, of course, Christmas Eve. This year they fall on the same day so figures for sales on Saturday 24 December are predicted to reach an all all-time high. They say that Christmas is the best time to forgive and forget. This appears to be regular practice with Cypriots, who have been reported to spend the most money of the entire year in the week leading up to Christmas, having mastered the skill of forgetting their financial difficulties and forgiving themselves for spending too much Merry Christmas!

BOOK REVIEW

Steve Jobs: The Exclusive Biography By Walter Isaacson (Little, Brown, 2011) RRP: £25.00 (£11.99 from Amazon.co.uk)

teve Jobs’ achievements with Apple speak for themselves but the story of how he did it – despite his personality or perhaps because of it – is a compelling read. Jobs certainly changed the lives of millions of people but it is clear that he was hell to work with. Isaacson has not fallen into the trap of portraying Jobs as a saintly genius; on the contrary, he is honest and open about the man’s flaws. The book also presents the evolution of the personal computer industry from the Apple II, through the Mac to the revolution brought by the iPod, iPhone and the iPad, the great successes that were based on fostering creativity and innovation, and on Jobs’ endless search for perfection, and achieved in a hostile environment due to Jobs’ mercurial personality, his tantrums and his selfish and arrogant attitude toward his partners, employees and competitors. Likeable or not, this biography provides a fascinating insight into how Jobs transformed himself from a penniless counterculture rebel into a businessman worth $256 million by the age of 25. Essential reading.

the international investment, business & finance magazine of cyprus

the last word

let’s do an apple on greece Why Greece must start building its brand

By Peter Economides

ith a population of just 11 million and another 6 million in the diaspora, Greece is by no means an international power player. But the concept of Greece is huge. It’s what prompted Valéry Giscard d’Estaing to say only last May that “Europe without Greece is like a child without a birth certificate.” A little more than a year later, Jean Leonetti, the French Minister for European Affairs said, “Greece is something we can get over, something we can manage without.” That’s a huge shift. What happened? The crisis happened. And this crisis is as much an image crisis as it is a financial crisis. Greece is living with an image deficit. Because Greece is one of the world’s greatest brands that has never been branded. There are those who might object to hearing the word “brand” associated with a

country. But whether we like it or not, each one of us is a brand. Just as every country is a brand. Because brand is nothing more than what people think of you. And branding, the process of managing brand, is the process of managing what people think of you. Branding is NOT a logo. It is not a slogan. It is not an advertising campaign. A brand is built through everything you do and don’t do, everything you say and don’t say. Because everything communicates. Play around with Google. Search for “Acropolis” and you’ll get about 17.6 million results. “Ancient Greece” – 15.7 million, “Mykonos” – 3.4 million, “Zorba” – 29.5

Greece has to manage its way out of this financial crisis and the way out is to manage the image crisis million, “Greece crisis” – 62.1 million, “Greece corruption” – 24.4 million, “Greece riots” – 9.7 million… That’s a fair reflection of what the media is talking about. And it’s a fair reflection of what the world thinks of Greece today. It is not a pretty picture…

Greece sells tourism. Fair enough ... it’s the country’s single largest source of income. But Greece must start building its brand. I studied economics but I have learnt the power of social psychology. When people feel great, they do great things. Screw economics. It’s just the scorecard that tells you how you are doing. Greece has to manage its way out of this financial crisis and the way out is to manage the image crisis. And this starts with how Greeks feel about themselves. It’s an “I feel bad about being Greek” crisis. A crisis of confidence. A crisis of self-belief. As I wrote last month, I was part of the team that relaunched Apple in 1997. At the time, Apple products were slow and expensive, irrelevant, and the company was almost bankrupt. There were no new products on the horizon. But we launched a campaign that became an instant classic: “Here’s to the crazy ones, the misfits, the rebels ... the one’s who see things differently ... and the ones who are crazy enough to think they can change the world, are the ones who do.” It’s a crazy idea but it’s crazy enough to succeed. Let’s do an Apple on Greece. Because Greeks have the power to imagine... Here’s to the crazy ones.

info: Peter Economides is a Brand Strategist and founder of Felix BNI. He is a former Executive Vice President and Worldwide Director of Client Services at global advertising agencies McCann-Erickson Worldwide and TBWA\Worldwide. He has worked on some of the world’s most iconic brands including Coca-Cola, Apple, Absolut, illy, Audi and Nike. In Cyprus, he has been involved in branding projects for Bank of Cyprus, Sigma Television and easy-forex. Peter is based in Athens. 98

the international investment, business & finance magazine of cyprus